More Action Needed on European Bank Profitability

August 30th, 2017|

By John Caparusso, Rohit Goel and Will Kerry

August 30, 2017

Versions in Español (Spanish), Deutsche (German), Français (French)

A woman withdraws money from an automated teller machine in Italy: Some European banks have too many branches relative to assets (photo: Martin Moxter imageBROKER/Newscom)

European banking has made considerable progress in the past few years: Banks have built up capital, regulation is stronger and supervision has been enhanced. But profitability remains weak, posing risks for financial stability.

In a sample of more than 170 large European lenders with combined assets of $35 trillion, roughly half generated a weak return on equity in 2016, and banks representing only 15 percent of assets generated a healthy return on equity, defined as more than 10 percent. Weak profitability is also shown in a low return on assets for domestic banks in many European countries. The drivers of these weak returns reflect varying combinations of low income, high costs, or provisions needed to build buffers against non-performing assets.

Continue reading “More Action Needed on European Bank Profitability” »

Off the Charts: Your Favorite 5 Charts

August 28th, 2017|

By IMFBlog

August 28, 2017

(photo: iStock by Getty Images).

Much as sailors use nautical charts to determine their location at sea, economists use charts to show who we are, where we are, and where we might be going.

In the Spring, we began our Chart of the Week feature on the blog: snapshots in time and over time of how economies work to help illuminate the uncharted waters ahead for the global economy.

Here are our top five charts of the week, based on readership:

Continue reading “Off the Charts: Your Favorite 5 Charts” »

Pension Shock

August 24th, 2017|

By Mauricio Soto

August 24, 2017

Young adults in the workforce will need to build their own nest eggs in the age of public pension reforms. (photo: Ingram Publishing/Newscom).

Young adults in advanced economies must take steps to increase their retirement income security

Public pensions have played a crucial role in ensuring retirement income security over the past few decades. But for the millennial generation coming of working age now, the prospect is that public pensions won’t provide as large a safety net as they did to earlier generations. As a result, millennials should take steps to supplement their retirement income.

Continue reading “Pension Shock” »

Chart of the Week: House of Cards

August 21st, 2017|

By IMFBlog

August 21, 2017

House for sale: young adults in the UK, US, and Europe have experienced declining home ownership rates (photo: Chris Helgren/Reuters/Newscom).

In some countries, owning a home is a rite of passage: a symbol of a stable life and a sound investment.

However young adults in the United Kingdom, United States, and Europe have experienced declining home ownership rates. Continue reading “Chart of the Week: House of Cards” »

Chart of the Week: Iceland’s Tourism Eruption

August 14th, 2017|

By IMFBlog

August 14, 2017

Tourists at Jokulsarlon iceberg lagoon in eastern Iceland. Tourism has become a pillar of the Nordic island’s economy (photo: Picture Alliance/Paul Mayall/Newscom).

Iceland’s tourist industry is burgeoning as adventure-seeking visitors flock to the rugged Nordic nation to partake in activities such as whale watching, ice climbing and spelunking.  

The number of foreign visitors to Iceland surged 40 percent to 1.8 million last year – dwarfing the island’s population of 335,000. This year, Keflavík airport expects another 27 percent increase, to 2.2 million, according to estimates cited in a recent study by IMF economist Uwe  Böwer. Continue reading “Chart of the Week: Iceland’s Tourism Eruption” »

Aging Japan Puts a Strain on the Financial System

August 10th, 2017|

By Gaston Gelos and Sònia Muñoz

August 10, 2017

Versions in 中文 (Chinese), 日本語 (Japanese)

Elderly shoppers in Tokyo’s Sugamo district: As Japan's population ages, demand for financial services shifts (photo: Issei Kato/Reuters/Newscom).

Japan’s population is shrinking and getting older, posing challenges to the nation’s financial system. How Japan copes could guide other advanced economies in Asia and Europe that are grappling with the same trends but are at an earlier phase of similar demographic developments.

Continue reading “Aging Japan Puts a Strain on the Financial System” »

Building Fiscal Institutions in Fragile States

August 9th, 2017|

By Katherine Baer, Sanjeev Gupta, Mario Pessoa

August 9, 2017

Version in Français (French)

A porter in the market in Kathmandu, Nepal: the country increased their tax revenues in recent years with the help of technical assistance (photo: Navesh Chitrakar/Newscom)

Fragile states face more obstacles to growth than most countries.  Their per-capita GDP is less than half of most other low-income countries, and their economies are more volatile.  Many are in conflict or going through a natural disaster, or just emerging from these.  Our study is based on 39 countries, and since completed, the number of fragile states has increased to 43. 

To grow, a country needs tax policies and tax administration, laws and institutions to formulate and execute a budget, and trained staff to implement fiscal policies, among other factors.  Our preliminary results show that fragile states that have received technical assistance, also have improved their fiscal performance.

Continue reading “Building Fiscal Institutions in Fragile States” »

Chart of the Week: The Potential for Growth and Africa’s Informal Economy

August 8th, 2017|

By IMFBlog

August 8, 2017

A street vendor sells roasted corn in Tanzania: Unregistered household enterprises comprise a significant portion of sub-Saharan Africa’s economy (photo: Ton Koene/VWPics/Newscom)

By 2035, sub-Saharan Africa will have added more working-age people to their workforce than the rest of the world’s regions combined. And this growing workforce will have to be met with jobs. In the region, up to 90 percent of jobs outside agriculture are in the informal sector. This includes household enterprises that are not formally registered, like street vendors or domestic workers. It also includes off-the-books activities by registered firms—for example, the taxi driver who offers a discount if the meter is not turned on.

Continue reading “Chart of the Week: The Potential for Growth and Africa’s Informal Economy” »

A Dip into Subzero Policy Rates

August 3rd, 2017|

by Giovanni Dell’Ariccia, Vikram Haksar, and Tommaso Mancini-Griffoli

August 3, 2017

Versions in ربي (Arabic), 中文 (Chinese),  Español (Spanish), 日本語 (Japanese); Русский (Russian)

A recent IMF paper looks at the effectiveness of negative interest rates, drawing on the initial experience of the euro area, Denmark, Japan, Sweden, and Switzerland (photo: Tuckraider/iStock by Getty Images)

Zero was gradually adopted in the ancient world—both east and west—as the ultimate point of reference, a point above and below which things change. For the ancient Egyptians, zero represented the base of pyramids. In science it became the freezing point of water, in geography the altitude of the sea, in history the starting point of calendars.

In the realm of monetary policy, zero was typically seen as the lower bound for interest rates. That has changed in recent years in the context of a slow recovery from the 2008 crisis. Several central banks hit zero and began experimenting with negative interest rate policies. Most did so to counter very low inflation, but some also were concerned about currencies that were too strong. Continue reading “A Dip into Subzero Policy Rates” »

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IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day.

The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.

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