The Current Economic Sweet Spot Is Not the “New Normal”

By Maurice Obstfeld

January 22, 2018

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Global growth continues to pick up and is broad based. But no matter how tempting it is to sit back and enjoy the sunshine, policy can and should move to strengthen the recovery (photo: Mumbai, India, Ingram Publishing/Newscom).

As the year 2018 begins, the world economy is gathering speed. The new World Economic Outlook Update revises our forecast for the world economy’s growth in both 2018 and 2019 to 3.9 percent. For both years, that is 0.2 percentage points higher than last October’s forecast, and 0.2 percentage points higher than our current estimate of last year’s global growth. Continue reading “The Current Economic Sweet Spot Is Not the “New Normal”” »

Weak Productivity: The Role of Financial Factors and Policies

By Romain Duval, Giuseppe Nicoletti, and Fabrizio Zampolli

January 8, 2018

Auto worker in Mexico: weak productivity has been a problem even before the global financial crisis (photo: Henry Romero/Newscom).

Almost ten years after the onset of the global financial crisis productivity growth remains anaemic in advanced economies despite very easy monetary conditions, casting doubts on the sustainability of the cyclical recovery. The productivity slowdown started well before the crisis, which then amplified the problem. To what extent can this slowdown be ascribed to policies and financial factors, including loose monetary policy prior to 2008, corporate and bank balance sheet vulnerabilities, and the exceptional monetary and financial policy responses to the crisis? Continue reading “Weak Productivity: The Role of Financial Factors and Policies” »

Gamechanger: The Digital Payment Boom in India

By IMFBlog

January 5, 2018

Madhur Deora, CFO of PayTM: Mobile payment platforms in India are providing small loans to people who’ve never had access to credit (IMF photo).

What does a shoe shiner in India have in common with central bankers and finance ministers? They both can appreciate the digital-payment boom. It’s sweeping the world but has accelerated in India, where last November the government demonetized—declaring that 86 percent of the country’s currency in circulation would cease to be legal tender. Continue reading “Gamechanger: The Digital Payment Boom in India” »

Fed Tightening May Squeeze Portfolio Flows to Emerging Markets

By Robin Koepke

December 14, 2017

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Derivatives traders in Singapore: Tighter Federal Reserve monetary policy is likely to reduce overseas purchases of emerging market stocks and bonds (photo: Caro/Rupert Oberhaeuser/Newscom)

A key question facing global investors today is what impact the US Federal Reserve’s monetary policy normalization process will have on capital flows to emerging markets. The IMF’s new model estimates show that normalization—raising the policy interest rate and shrinking the balance sheet—will likely reduce portfolio inflows by about $70 billion over the next two years, which compares with average annual inflows of $240 billion since 2010. Continue reading “Fed Tightening May Squeeze Portfolio Flows to Emerging Markets” »

Propping Up the Chinese Economy: Credit versus Fiscal Stimulus

By Sophia Chen and Lev Ratnovski

December 13, 2017

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Construction work Qingyuan , Guangdong, China : Fiscal stimulus is a powerful tool for growth (photo: Imagine China/Newscom).

Credit booms are addictive. Credit supports growth and the perception of wealth. Yet credit booms are risky, and are often followed by financial busts and economic slowdowns. The challenge is taming credit without hurting growth. Continue reading “Propping Up the Chinese Economy: Credit versus Fiscal Stimulus” »

Corruption Disruption

By Christine Lagarde

December 8, 2017

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Corruption can have devastating effects on economic growth and stability (photo: Patric Sandri IKON Images/Newscom)

Why does the IMF care so deeply about corruption? The reason is simple. The job of the IMF is to protect global economic stability and promote strong, sustainable, balanced, and inclusive economic growth. And this becomes difficult, if not impossible, to achieve in the presence of entrenched and institutionalized corruption. Continue reading “Corruption Disruption” »

Improving Financial Stability in China

By Ratna Sahay and James P. Walsh

December 6, 2017

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A man walks past a bank branch in Beijing: China’s leaders have made financial stability one of their top priorities (photo: Stephen Shaver/UPI/Newscom).

China’s leaders have made financial stability one of their top priorities. Given the size and importance of the Chinese market, with the world’s largest banks and second-largest stock market, that is welcome news for China and the world. The financial system permeates virtually all aspects of economic activity, having played a key role in facilitating rapid economic growth and in sharply reducing poverty rates.

China is moving from the world’s factory floor toward  a more modern, consumer-driven economy. During this transition, however, some tensions have emerged in the financial sector. Continue reading “Improving Financial Stability in China” »

More Action Needed to Resolve Problem Loans in the Caribbean

By Kimberly Beaton and Inci Otker

October 31, 2017

The global financial crisis has left high levels of problem loans in the Caribbean (image: William Potter/iStock by Getty Images).

The global financial crisis and subsequent economic recession saddled banks in the Caribbean with high levels of problem loans. The share of nonperforming loans to total loans more than tripled in many Caribbean countries from 2007 to 2016, and they have been slow to come down. Problem loans (loans that are 90 days or more past due) are bad news for banks and the economy. Continue reading “More Action Needed to Resolve Problem Loans in the Caribbean” »

Cyber Defense Must Be Global

By Emanuel Kopp, Lincoln Kaffenberger, and Christopher Wilson

October 26, 2017

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Cyber risk has no geographical borders, and the threat is global, so the role of international institutions is crucial (solarseven/iStock by Getty Images).

Cyberattacks on financial institutions are becoming more common and considerably more sophisticated. High-profile cases like the Equifax breach, which compromised the confidentiality of 143 million Americans’ credit information, and the theft of US$81 million from Bangladesh Bank, are just two examples of recent cyber breaches in the financial industry.

Today, cyber risk is a permanent threat to financial institutions and the proper functioning of the highly interconnected financial system. Banks of all sizes experience cyberattacks every day. Breaches of individual firms can cause adverse knock-on effects for other financial and nonfinancial firms and give rise to systemic risk, a new dimension of cyber risk that is little understood. Continue reading “Cyber Defense Must Be Global” »

Financial Stability Improves, But Rising Vulnerabilities Could Put Growth at Risk

By Tobias Adrian

October 11, 2017

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The headquarters of the European Central Bank in Frankfurt, Germany: To avoid causing market turbulence, central banks will have to clearly communicate their plans to gradually unwind crisis-era policies (photo: Caro/Sven Hoffman/Newscom).

It seems like a paradox. The world’s financial system is getting stronger, thanks to healthy economic growth, buoyant markets, and low interest rates. Yet despite these favorable conditions, dangers in the form of rising financial vulnerabilities are starting to loom. That is why policymakers should act now to keep those vulnerabilities in check. Continue reading “Financial Stability Improves, But Rising Vulnerabilities Could Put Growth at Risk” »

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