Arab Economic Transformation Amid Political Transitions

Masood Ahmed #2By Masood Ahmed

(version in عربي)

The International Monetary Fund released today a new paper entitled “Toward New Horizons—Arab Economic Transformation amid Political Transitions.”

The paper makes the case for the urgency of launching economic policy reforms, beyond short-term macroeconomic management, to support economic stability and stronger, job-creating economic growth in the Arab Countries in Transition—Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen.

These countries face the risk of stagnation if reforms are delayed further.Economic conditions have deteriorated from transition-related disruptions, regional conflict, an unclear political outlook, eroding competitiveness, and a challenging external economic environment.

As economic realities fall behind peoples’ expectations, there is a risk of increased discontent. This could further complicate the political transitions, impairing governments’ mandates and planning horizons and, consequently, their ability to implement the policies necessary to catalyze the much-needed economic improvements.

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A Wish List for China’s Third Plenum

ASinghBy Anoop Singh

(Versions in 中文 and Español)

Hard landing, soft landing, no landing, overheating. Pundits’ views on China’s economy bounce around—often rapidly—between these descriptions.

Just two short months ago, the dominant concern was about a sharp slowdown, below this year’s official growth target of 7½ percent. Now, these fears have retreated, pushed aside by talk of renewed momentum.

Our sense, here at the International Monetary Fund, has always been that economic growth will slightly surpass this year’s official target. But we have also cautioned that China’s economic challenges are growing, and that accelerating reform is critical for containing risks and achieving a smooth transition to sustainable growth.

The upcoming Third Plenum provides an opportunity for the new leadership to provide guidance on how they plan to meet these challenges.

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The Long-term Price of Financial Reform

In response to the global crisis, policymakers around the world are instituting the broadest reform of financial regulation since the Great Depression. Some in the financial industry claim the long run economic costs of these global reforms outweigh the benefits. But our new research strongly suggests the opposite—the reforms are well worth the money.

Lurking in the Shadows—The Risks from Nonbank Intermediation in China

One of my all-time favorite movies is “The Third Man” starring Orson Welles and Joseph Cotten. Perhaps the most striking part of the movie is the shadowy cinematography, set in post-World War II Vienna. Strangely, it springs to mind lately when I have been thinking of China. Many China-watchers looked on in 2009 as the government’s response to the global financial crisis unfolded, causing bank lending to expand by close to 20 percentage points in less than a year. At the same time, a less visible phenomenon was also getting underway. One that, like Orson Welles’ character in the movie, resided firmly in the shadows. Various types of nonbank financial intermediaries were gearing up to provide more credit. Talking to people in China, and looking at what numbers are available, one cannot help but have an uneasy feeling that more credit is now finding its way into the economy outside of the banking system than is actually flowing through the banks. This worries me for four broad reasons.

By | November 3rd, 2011|Asia, Financial regulation, International Monetary Fund|24 Comments

The Other Rebalancing: Asia’s Quest for Inclusive Growth

For the past two or three decades, rising inequality—inequality of incomes, of economic outcomes and of economic opportunities—has taken a back seat to the goal of boosting overall growth. But growing discontent with the fallout of the global financial crisis has put inequality back on top of the policy agenda. While the symptoms may be different, tackling inequality is no less an issue in Asia. Indeed, research shows that inequality can be counterproductive to sustaining longer-term growth. So, in increasingly turbulent global economic times, this gives added importance to promoting shared—or inclusive—growth in Asia that is more likely to be sustained. This has been a major focus our latest Regional Economic Outlook, which we presented in Manila today. A great challenge for the government here, and for other countries across the region, is to raise living standards for a wide section of their populations.

The Two Rebalancing Acts

Achieving a “strong, balanced, and sustained world recovery”—to quote from the goal set in Pittsburgh by the G-20—was never going to be easy. It requires much more than just going back to business as usual. It requires two fundamental and complex economic rebalancing acts: internal and external rebalancing. These two rebalancing acts are taking place too slowly. As the latest World Economic Outlook reveals, the result is a recovery which is neither strong, nor balanced, and runs the risk of not being sustained.

Financial System Fragilities – Achilles’ Heel of Economic Recovery

It would be unfair for any assessment of global economic and financial stability not to acknowledge the tremendous progress has been made in repairing and strengthening the financial system since the onset of the global crisis. Still, the key message from the IMF’s October 2010 Global Financial Stability Report is clear. Progress toward global financial stability has suffered a setback over the past six months—the financial system remains the Achilles’ heel of the economic recovery. In this blog post, José Viñals discusses two broad issues. What is at the heart of this lingering lack of confidence? And, looking ahead, what are the policy priorities?

Toto, we’re not in Kansas anymore: Exploring the Contours of the Financial System After the Tornado

Just as a tornado in Kansas transplanted Dorothy and, her dog, Toto from familiar comforts to the unknown land of Oz, the global crisis has led many to wonder what has become of the global financial system and, more importantly, what will it look like next. Is the wicked witch of the West—excessive risk taking and leverage—really dead? Now, as the storm subsides, there is time to speculate about what the future financial sector might look like. Here, Laura Kodres blogs about a new Staff Position Note she co-authored with Aditya Narain that attempts to discern the contours of this new financial landscape.

A Marriage Made in Heaven or Hell: Monetary and Financial Stability

Price stability has long been enshrined as the main objective of monetary policy, and, with that, gone are the days of high and volatile inflation. Monetary stability seems almost a given today. However, the global financial crisis revealed that, by focusing on price stability, monetary policy frameworks might not always sound the alarm when financial stability comes under threat. In his latest blog, José Viñals reflects on the monetary policy lessons that emerged from the global financial crisis and the need for a "happy marriage" between the goals of price stability and financial stability.

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