Europe’s sovereign debt crisis, fiscal challenges in advanced economies, concerns about overheating in emerging market countries, and the impact of rising food prices. These are the hot topics at this year’s World Economic Forum in Davos, Switzerland, and a clear sign of the tensions and risks as the global economy recovers. In an interview from Davos, the IMF’s First Deputy Managing Director John Lipsky tells us that, with the return of global growth, the mood is certainly more optimistic than it was a year or two ago. But there is also a clear sense among delegates that this has not solved some of the world’s important economic problems.
So, where does the global financial system stand at the moment? Yes, we have witnessed improvements recently, but we are also observing a dichotomy between the economy and the financial system. While the global economic recovery has been continuing, financial stability is still at risk, because of a persistent lack of investor confidence in some advanced country sovereigns and their banking systems. In this post José Viñals reflects on the IMF’s updated assessment of global financial stability, including the key challenges that keep global financial stability at risk and the policies needed to meet these challenges.
The world economic recovery continues. Although global growth is set to slow over the coming year, underlying private demand is improving and we expect the slowdown to be modest. Global growth should remain at 4.4 percent in 2011, down from 5 percent in 2010. But it remains a two-speed recovery: slow in advanced countries, and much faster in emerging and developing economies. As a result, tensions and risks are emerging, which require strong policy responses. In this post, Olivier Blanchard discusses the IMF’s update of the world economic outlook, including the short-term tensions and risks, and what needs to be done, to reduce risks and strengthen the global recovery.
Many Latin American economies are booming due to strong capital inflows and high commodity export prices. Though favorable today, booms can also be a double-edged sword. Risks that emerge, if excessive or poorly managed, can sow the seeds of future problems. Effective macroeconomic policy management and implementation is needed to avoid boom-bust cycles with which Latin America is all too familiar. But, for that, information is an essential ingredient. Countries in Latin America have made good progress in strengthening statistics, but this blog posts identifies three key areas that are particularly relevant for monitoring the accumulation of risks and potential overheating where more action is needed.
The three Baltic states—Estonia, Latvia and Lithuania—were among the first victims of the global financial crisis. Although adjustment is still far from complete, a recovery is now underway. It is still too early to judge the success of the Baltic strategy, but it's fair to say that the most dire predictions have not come true.
John Lipsky, First Deputy Managing Director of the IMF, looks at the year ahead and says 2011 represents a pivotal time for global economic recovery and for international policy cooperation—as well as for the role of the Fund in addressing these two principal challenges.
The iMF Direct Blog has picked our list of must read posts covering the highs and lows of global finance and government budgets and spending.