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Dear Colleague, welcome to the October 22 briefing from the Annual Meetings
In the first of our daily newsletters from the Annual Meetings, we spotlight the global economic outlook, discuss the disconnect between financial markets and geopolitics, explore Barbados's debt for climate swap, watch the Managing Director's townhall with civil society organizations, and much more as we mark the beginning of the IMF-World Bank Annual Meetings.
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(Credit: IMF Photo/Jonathan Ernst)
Global economic growth is projected to hold steady as inflation recedes, but amid weakening prospects and rising threats, the world needs a shift in policy gears, the IMF’s chief economist told a press briefing on Tuesday.
Speaking at the launch of the World Economic Outlook, Pierre-Olivier Gourinchas said the outlook is dominated by downside risks, including escalating regional conflicts, especially in the Middle East, shifts toward trade and industrial policies that could cut economic output, and a sharp fall in migration to advanced economies. All of these could fan inflationary pressure and trigger a sudden tightening of global financial conditions, he said.
According to the IMF’s latest outlook, global growth is projected at 3.2 percent this year and next, but some developing economies have seen sizable downward growth revisions, often tied to intensifying conflicts or climate shocks.
Policymakers must act on three fronts, Gourinchas said. The first shift, on monetary policy, is underway already as major central banks cut interest rates and move toward a neutral stance.
The second shift is on fiscal policy. After years of loose fiscal policy in many countries, it’s time to stabilize debt and rebuild much-needed fiscal buffers, Gourinchas said.
And finally, policymakers must pursue growth-enhancing reforms to lift medium-term prospects from the lowest level in decades. “Economic growth must come…from ambitious domestic reforms that boost innovation, human capital, improve competition and resource allocation,” Gourinchas told the briefing. “This is the only way we can address the many challenges we face.”
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(Credit: IMF Photo/Jonathan Ernst)
“Global inflation has progressed towards target in most countries,” IMF Financial Counselor Tobias Adrian told attendees at the Global Financial Stability Report press briefing. With “inflation heading towards target in many countries, the focus of the central banks has shifted from being primarily focused on inflation and towards also considering real activity,” he added.
Positive earnings surprises have lifted financial markets, while the likelihood of a global recession has continued to recede, he said. Adrian warned of a potential disconnect between upbeat investor expectations and the increase in geopolitical and economic uncertainty. While the implied volatility in equity markets is at “fairly low levels” by historical standards, measures of geopolitical and economic uncertainty “continue to be relatively elevated.”
This creates what the director of the monetary and capital markets called a “wedge” between financial market actors’ assessments and the perceived geopolitical risks. “This tension worries us as it gives rise to the potential for a sharp readjustment of financial conditions,” he said.
Read the blog, Global Financial Fragilities Mount Despite Rate Cuts and Buoyant Market, on the latest financial stability report.
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(Credit: IMF Photo/Valerie Plesch)
At the Climate Voices: Catalyzing Private Finance event, leaders discussed innovative ways to mobilize climate finance. Barbados' debt-for-climate conversion offers a groundbreaking model, blending public and private resources to bolster climate resilience and adaptation.
Barbados Prime Minister Mia Mottley emphasized the urgency, stating, "If we don’t spend this money, regrettably the scale of the damages and loss of life will be unacceptable." She highlighted the chronic climate challenges Barbados faces, such as water scarcity, alongside extreme events like hurricanes.
Nadia Calviño from the European Investment Bank reinforced the importance of proactive investment, noting, "Every euro invested in climate resilience saves 5 to 7 euros in repairing the damage."
The panel, which was moderated by IMF Deputy Managing Director Bo Li, also included Ana María Ibáñez, Vice President for Sectors and Knowledge at the IDB, and Donna Wellington, Managing Director of CIBC Caribbean Bank - Barbados & Eastern Caribbean.
With support from institutions like the European Investment Bank, the Inter-American Development Bank (IDB), and private sector partners, this innovative model offers a scalable solution to finance climate action without adding to public debt, paving the way for broader application in emerging markets.
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(Credit: IMF Photo/Alyssa Schukar)
IMF Managing Director Kristalina Georgieva engaged with civil society representatives in a townhall on Monday moderated by the Fund’s Communications Director Julie Kozack. The Civil Society Policy Forum (CSPF) is a key event during the International Monetary Fund- World Bank Group Spring and Annual Meetings. This weeklong forum provides an open space for Civil Society Organizations (CSOs) to dialogue and exchange views with IMF and World Bank Group staff, their peers, government delegations, and other stakeholders on a wide range of shared development issues. Click here for the schedule of events during this year’s Civil Society Policy Forum.
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(Credit: IMF Photo/Jonathan Ernst)
Africa’s population is booming. And by 2030, half of the increase in the global labor force will be from sub-Saharan Africa, presenting opportunities but also enormous challenges, particularly to fragile and low-income countries. The region will need up to 15 million new jobs annually by 2030, and job creation is currently not on pace.
Three main challenges must be tackled, according to Athene Laws and Faten Saliba from the IMF’s African department: (1) transforming informality; (2) addressing firm growth barriers, and (3) accelerating structural transformation. The economists told an Analytical Corner audience Monday that broad-based and inclusive productivity growth is needed, including in the informal sector, which they called a “trap” for many, but can be a “stepping-stone” to more secure work in the formal sector. “Sub-Saharan Africa has no problem with firm creation,” Saliba noted, but firm growth remains elusive.
They emphasized the need for increased productivity and labor demand and highlighted some industries that have the potential to employ more people in the region, including IT, agro-processing, and tourism.
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(Credit: IMF)
IMF lending programs are often aligned with increased development assistance to low-income countries (LICs), particularly in times of economic stress. In an Analytical Corner, economists Phil Johnston and Agustin Velasquez shared that every $1 of IMF lending helps catalyze nearly $3 in additional support from the international donor community. Their research also finds that LICs engaged in an IMF program receive nearly double the levels of development assistance compared to those who are not. The conditionality and monitoring tied to an IMF disbursement can often serve as a signal to donors of country authorities’ commitment to macroeconomic stability.
Receiving financial support from multiple branches can significantly help low-income countries reach development goals, ease adjustments from reforms, and cushion future shocks. The economists stressed the need to continue ensuring adequate financing to low-income countries, through both the international donor community and the IMF’s own Poverty Reduction and Growth Trust.
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NUMBER OF THE DAY
Every $1 of IMF lending helps catalyze nearly $3 in additional support from the international donor community.
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$1 for $3
ADDITIONAL SUPPORT
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Claire Shipman, journalist and author of The Power Code joined Sabina Bhatia, Deputy Secretary of the IMF, on Monday for a conversation on women’s empowerment and leadership.
Shipman, who was welcomed with remarks from IMF Managing Director Kristalina Georgieva, shared her thoughts on the divergent ways men and women define power. “Women tend to think about ‘power to,’ while men tend to think about ‘power over.’ And that’s a pretty fundamental difference. The ‘power over’ is based on a hierarchical system.”
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(Credit: IMF Photo/Allison Shelley)
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When asked why progress for women in leadership positions has been lacking, Shipman pointed to a combination of factors: both bias in the workplace, and the fact that women often opt out of a power structure they think doesn’t fit their values.
Shipman remarked upon the model the IMF provides for other organizations with two consecutive female Managing Directors, first Christine Lagarde and now Georgieva. “The impact of that is profound,” Shipman said. “Having two women in a row in itself is significant, when you look at bias and expectations and want to normalize what different leadership looks like.”
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“This time is different because as a country our hand has been forced,” said Pakistan’s Finance Minister Muhammad Aurangzeb as his country currently implements its twenty-fifth program with the IMF. In a discussion with Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, Aurangzeb added that Pakistan has been caught in boom-and-bust cycles, but it’s reached a “saturation point.” |
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(Credit: IMF Photo/Tangyu Zhang)
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It has no choice but to press ahead with implementing key structural reforms such as broadening the tax base and improving the management of State-Owned Enterprises. “We have to change the DNA of the economy,” he said, and move away from Pakistan’s state-led growth model to export-led growth driven by the private sector.
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