|
Dear Colleague,
Welcome to the April 7 briefing of the 2021 Spring Meetings.
Today we spotlight the release of the IMF's Fiscal Monitor report (starting now), a capacity development talk on achieving inclusive growth, a press briefing with IMF Managing Director Kristalina Georgieva, an analytical corner session on inequality and debt, and a flagship IMF Seminar conversation between MD Georgieva and John Kerry on tackling climate change. On that note, let's get started.
📣 What do you think of the Spring Meetings and our coverage so far? Take 60 seconds and let us know.
Today's media partners: AFRICA24, first global news channel for Africa, has risen to be the leader on African news. Al Arabiya is the go-to for those seeking on the ground, first-hand coverage of major events across the Arab and wider world.
TODAY'S AGENDA (WEDNESDAY, APRIL 7)
Speakers: Vitor Gaspar, Director, Fiscal Affairs Department, IMF; Paolo Mauro, Deputy Director, Fiscal Affairs Department, IMF // Moderator: Ting Yan, Communications Officer, IMF.
Panelists: Mark Carney, UN Special Envoy on Climate Action and Financial and Finance Adviser to UK Prime Minister for COP26; Sri Mulyani Indrawati, Minister of Finance, Indonesia.
10:00 AM - 10:45 AM
G20 Press Briefing
Speakers: Introduction: Sharmini Coorey, Director, Institute for Capacity Development, IMF; Antoinette Sayeh, Deputy Managing Director, IMF; Valerie Cerra, Assistant Director and Division Chief, IMF; Maksym Ivanyna, Economist, IMF; Nathalie Pouokam, Economist, IMF; Nikola Spatafora, Senior Economist, IMF.
Speaker: Kristalina Georgieva, Managing Director, IMF // Moderator: Gerry Rice, Director, Communications Department, IMF.
Speakers: Habtamu Fuje, African Department, IMF; Rasmane Ouedraogo, African Department, IMF; Ervin Prifti, Research Department, IMF; Christian Bogmans, Research Department, IMF; Tim Willems, Strategy, Policy, and Review Department, IMF.
Speakers: Kristalina Georgieva, Managing Director, IMF; John Kerry, Special Presidential Envoy for Climate // Moderator: Becky Anderson, Anchor, CNN International.
TAILORING GOVERNMENT SUPPORT
In a new blog by Vitor Gaspar, W. Raphael Lam, Paolo Mauro, and Mehdi Raissi, based on the latest Fiscal Monitor report, they write that If the global pandemic is controlled via vaccination, the resulting stronger economic growth would yield more than $1 trillion in additional tax revenues in advanced economies by 2025—and save more in fiscal support measures. The COVID-19 vaccination will thus more than pay for itself, providing excellent value for the public money invested in it.
Until the pandemic is brought under control, fiscal policy will have to remain flexible and supportive. The need and scope for such support varies across sectors and economies, with responses tailored to country circumstances.
However, governments should prioritize the following:
More targeted support to vulnerable households. The pandemic has had a disproportionately negative effect on poor people, youth, women, minorities, and workers in low-paying jobs and the informal sector. Policymakers should ensure that social protection is available and spending is sustainable over the duration of the crisis by expanding the coverage of social safety nets in a cost-effective way (for example, by limiting the leakage of benefits to unintended beneficiaries).
More focused support to viable firms. If the pandemic persists, widespread corporate insolvencies could result, destroying millions of jobs, particularly in contact-intensive service sectors and small and medium-sized enterprises. At the same time, governments would do well to prevent resource misallocations and limit the rise of nonviable firms. Governments could gradually roll back blanket loans and guarantees, and limit public support to circumstances in which there is a clear need for intervention. Partnering with the private sector to assess the viability of firms before providing support can improve targeting and reduce administrative costs.
Read the full report and 📺 watch the press briefing here.
AN ASYNCHRONOUS AND DIVERGENT RECOVERY MAY PUT FINANCIAL STABILITY AT RISK
After enduring a tumultuous 2020, the global economy is finally emerging from the worst phases of the COVID-19 pandemic, albeit with prospects diverging starkly across regions and countries—and only after a “lost year” spent in suspended animation. The economic trauma would have been much worse if the global economy had not been supported by the unprecedented policy actions taken by central banks and by the fiscal measures implemented by governments.
Global markets are watching the current rise of US long-term interest rates, worried that a rapid and persistent increase may result in tighter financial conditions, potentially hurting growth prospects. Since August 2020, the yield on the US 10-year Treasury note has risen by 1¼ percentage points to around 1¾ percent in early April 2021, returning close to its pre-pandemic level of early 2020.
The good news is that the rising rates in the United States have been spurred in part by improving vaccination prospects and strengthening growth and inflation. As described in the latest Global Financial Stability Report, both nominal and real interest rates have risen, although nominal yields have risen more, suggesting that market-implied inflation—the difference between yields on nominal and inflation-indexed Treasury securities—is recovering. Allowing a modest amount of inflation has been an intended objective of easy monetary policy.
The bad news is that the increase may reflect uncertainty about the future path of monetary policy and possibly investor concerns about the increased supply of Treasury debt to finance the fiscal expansion in the United States, as reflected by sharply rising term premia (investors’ compensation for interest-rate risk). Market participants are beginning to focus on the timing of the Federal Reserve’s tapering of its asset purchases, which could push long-term rates and funding costs higher, thereby fueling a tightening of financial conditions, especially if associated with a decline in risk assets’ prices.
Read the new blog by Tobias Adrian, and read the full report / 📺 watch the briefing.
🎙️ If you have 15 minutes, listen to a new podcast on the report with Fabio Natalucci.
TOMORROW'S AGENDA (THURSDAY, APRIL 8)
Speakers: Kristalina Georgieva, Managing Director, IMF; Magdalena Andersson, Chairman for the International Monetary Fund and Financial Committee (IMFC) //
Moderator: Gerry Rice, Director, Communications Department, IMF.
Speakers: Diego Cerdeiro, Asia and Pacific Department, IMF; Alpa Shah, Fiscal Affairs Department, IMF; Catalina Margulis, Legal Department, IMF.
Speakers: Kristalina Georgieva, Managing Director, IMF; Jerome Powell, Chair, Federal Reserve; Paschal Donohoe, Finance Minister, Ireland; Ngozi Okonjo-Iweala, Director-General, World Trade Organization (WTO) // Moderator: Sara Eisen, CNBC Co-Anchor “Closing Bell”.
RECAP OF YESTERDAY
The latest World Economic Outlook report
"It is one year into the COVID-19 pandemic and the global community still confronts extreme social and economic strain as the human toll rises and millions remain unemployed. Yet, even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible," IMF Chief Economist Gita Gopinath writes in a new blog accompanying our latest release of the World Economic Outlook.
The numbers: We are now projecting a stronger recovery for the global economy compared with our January forecast, with growth projected to be 6 percent in 2021 (0.5 percentage point upgrade) and 4.4 percent in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3 percent in 2020.
Click here to watch the press conference and read the IMF's latest World Economic Outlook report.
Towards a Green, Resilient and Inclusive Future
The lingering pandemic has dealt the global economy an unprecedented shock, and the recovery is likely to be slow and uneven. Disadvantages and inequalities have been amplified, with harm falling hardest on poorer people, firms, and countries which face obstacles to financial resources and networks. What is needed to support a faster and deeper economic recovery that lays a foundation for a more sustainable and inclusive global economic system?
David Malpass, President of the World Bank Group, Kristalina Georgieva, Managing Director of the International Monetary Fund, and Janet Yellen, U.S. Secretary of the Treasury dove into this discussion through the lens of three key issues: sustainability, resilience & innovation, and inclusion. 📺 Watch the video here.
Averting the COVID-19 Debt Trap
Managing Director Kristalina Georgieva discussed how tackling debt vulnerabilities is critical to prevent divergent recoveries. A panel that includes Mohamed A. El-Erian, President of Queens' College, Cambridge, and Vera Songwe, Under-Secretary-General of the United Nations explored ways to contain debt risks through better debt architecture and transparency and how global cooperation can help.
Georgieva noted that global public debt is near 100% of GDP, and that advanced economies have jumped the most, but that they have a much higher capacity to carry this debt. Emerging markets, however, with weaker fundamentals and low-income countries have more limited fiscal space. El-Erian fears that we may face a lost decade to a set of countries in Africa and in Asia. And Songwe explained that in Africa, we face a huge risk not only of a debt trap, but also a poverty trap. 📺 Watch the discussion here.
Governor Talks on Pandemic Recovery
In a discussion with Fahad Almubarak, Saudi Central Bank Governor, on policy responses to COVID-19, he said, "We made vaccines available to all those who live in Saudi Arabia, whether they are Saudis or non-Saudis. When it comes to health, there is no difference." 📺 Watch more here.
In a conversation with Boris Vujčić, Governor of Croatian National Bank, on asset purchase programs in emerging markets, he said, "The longer the Asset Purchase Programs last, the higher the risk that both the governments and markets become highly dependent on these policies, and the more difficult the exits are." 📺 Watch more here.
📺 Watch more governor talks with officials from Brazil, Thailand, Spain and Burkina Faso.
EARLIER THIS WEEK
In a new blog by the IMF's Phillipp Engler, Roberto Piazza and Galen Sher, based on the analytical chapter 4 of our latest World Economic Outlook, they write that the reason behind rising interest rates in advanced economies matters when it comes to the impact on emerging markets.
In a new blog by the IMF's Guillaume Chabert, Robert Gregory and Gaelle Pierre, based on a new policy paper, they estimate that low-income countries will need around $200 billion until 2025 to step up their response to the pandemic, and a further $250 billion to catch up with advanced economies. An additional $100 billion will be needed if risks identified in the baseline scenario materialize.
Aurélia Nguyen, Managing Director of the COVAX Facility and Sabina Bhatia, Deputy Secretary of the IMF, discussed the challenges of vaccine procurement and distribution, and highlighted the need for international cooperation to secure global and equitable access to vaccines. 📺 Watch the full event by clicking here.
In governor talks on Monday, Lassané Kabore, Minister of Economy, Finance and Development of Burkina Faso, said the pandemic has made teleworking, remote filing of taxes, and remote payment all part of the work habit in public services. Nadia Calviño, Spain's Vice-President and Minister of Economy and Digitalization, said gender equality should be at the top of the agenda--not only for reasons of fairness, but also because we can close the potential growth gap if we manage to mobilize the talent of 100 percent of our population.
The IMF Executive Board on Monday extended debt service relief for 28 eligible low-income countries through October 15. The debt relief will help free up scarce financial resources for vital emergency health, social, and economic support to help with the impact of the COVID-19 pandemic.
RECAP OF LAST WEEK
In a new blog by Federico J. Díez, Romain Duval, Chiara Maggi and Nicola Pierri, based on new staff research, they explain how the pandemic has hit small and medium enterprises particularly hard, partly because they are predominant in some contact-intensive sectors like hotels, restaurants, and entertainment. They also suggest that policymakers take novel and swift action to alleviate a wave of insolvencies.
IMF Managing Director Kristalina Georgieva set the stage for the Spring Meetings by discussing the future of the global economy at an event hosted by the Council on Foreign Relations and moderated by CNN's Fareed Zakaria. Read the full speech or 📺 watch the 60-min discussion.
Read a blog, based on the analytical chapter 2 of our latest World Economic Outlook, about how countries can slowly heal the economic scars that will result from the crisis. Another blog, based on analytical chapter 3 of our latest World Economic Outlook, explores how policies can lessen the pandemic’s harsh and unequal effects on workers.
Also, catch up on blogs covering analytical chapters of the Global Financial Stability Report. A blog based on the analytical chapter 2 explains how the easing of financial conditions in response to an economic crisis tends to accelerate buildups in leverage or the ability to borrow, which could cause trouble down the line. Another blog, based on the analytical chapter 3, finds that pandemic's shift to working from home has clouded the outlook for commercial real estate and potentially threaten financial stability.
Finally, tied to the release of the Fiscal Monitor today, read a blog based on a new analytical chapter, that finds that inequality was a pre-existing condition that worsened COVID-19’s impact.
Click here to review the full rundown of last week.
HAVE YOUR SAY IN 60 SECONDS
📝 What do you think of the Spring Meetings and our newsletter coverage so far? Share your thoughts and feedback directly by answering this quick survey. Your comments will very much inform our agenda and coverage moving forward.
Sincerely,
IMF 2021 Spring Meetings Team
|
