Archives of “international monetary fund” tag

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World Bank leaders found to be favouring China … “Doing Business”

  
  Analysis
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An internal committee of the World Bank managed to launch an independent investigation into top brass …

The World Bank ethics committee commissioned a law firm to sniff out what was going on.
Their report found that World Bank leaders, including then-Chief Executive Kristalina Georgieva, applied “undue pressure” on staff to boost China’s ranking in the bank’s “Doing Business 2018” report:
  • Georgieva, and a key adviser, Simeon Djankov, had pressured staff to “make specific changes to China’s data points” and boost its ranking at a time when the bank was seeking China’s support for a big capital increase.
  • The report raises concerns about China’s influence at the World Bank, and the judgment of Georgieva – now managing director of the International Monetary Fund – and then-World Bank President Jim Yong Kim.
  • Georgieva said she disagreed “fundamentally with the findings and interpretations” of the report and had briefed the IMF’s executive board.

Kristalina Georgieva now heads the IMF.  Oh dear.

An internal committee of the World Bank managed to launch an independent investigation into top brass ... 

Fed’s Powell. Vaccinations, monetary policy and fiscal policy creates brighter outlook

  
  Analysis
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Feds Powell on IMF panel

  • Vaccinations, monetary policy and fiscal policy are creating a brighter outlook in the US
  • Wants to see a string of months like March jobs report
  • unevenness in recovery is a serious issue
  • global vaccination is a risk to progress we are making
  • There is a risk in the US if cases move back up from here. Any pickup and cases will slow the recovery

The coming debt and population problem

  
  Analysis
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Death and taxes

Debt levels are set to rise to unprecedented levels. According to the International Monetary Fund in June the public debt, as a share of GDP in advanced economies, is set to come in at over 130% for this year and next. To put that into perspective that surpasses the debt levels from the second world war.If you look at the chart below you can see that the double whammy of the Global Financial Crisis, followed by the present pandemic is pushing debt to record levels.

Death and taxes

 

The population problem

The general thinking now is that the present crisis is a one in a hundred years kind of event (what if it isn’t) and that future generations will be able to claw back the debt levels over time. However, a publication from the Lancet in the UK suggests that there is a falling population that could fall by 9% at the end of the century. So, this means that there will be a large decline in numbers of working age adults. There are some countries which are projected to be particularly badly hit. Japan, Spain, Portugal, and Thailand are expected to see their populations halve by the end of the century. The countries which are projected to see 25% population declines are also projected to see a higher ration of older to younger people. So, more of this debt is going to be shouldered by fewer as an ageing population raises further spending considerations.

What will happen next?

There will be moves by governments to start to cap this debt problem. It will not be allowed to continue unless we get into worst disasters than we presently are in. The main concern is that of default. As long as willingness to repay remains, then the debt pile can be reduced. The main risk is if the debt becomes too great and the easiest solution is to just walk away…

IMF cites important risks to the outlook for US economy

  
  Analysis
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IMF on the US.

The IMF is out with a series of headlines on the US economy as the coronavirus risks increase.  They say:

  • Cites important risks to outlook for US economy including resurgence in coronavirus cases, systematic increase in property
  • Significant increase in US debt levels creates vulnerabilities; sees risk of extended period of low or negative inflation
  • Repairing US economy will take prolonged period, further policy efforts needed to boost demand, support most vulnerable
  • US should reverse existing trade barriers, tariff increases that are undermining stability of global trade
  • US treatment of undervalued currencies as countervailable subsidy poses significant risk to global trading system
  • Sees areas where US financial oversight could be tightened to further mitigate systematic risks
  • US financial system has proven resilient, but crisis at early state and banks should continue to restrain capital distribution plans
The statements do not give a warm fuzzy feeling

IMF’s Georgieva: Rising global debt levels are a serious concern

  
  Analysis
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Comments by IMF chief, Kristalina Georgieva

Kristalina Georgieva
  • But warns against premature withdrawal of fiscal support
  • Monetary policy should remain accommodative
  • Global economy is “not out of the woods yet”
  • Second major virus wave could case further disruptions
  • Job losses, bankruptcies, industry restructuring poses significant challenges

Some token remarks as a whole, but the headline comment is going to be an issue that is likely reverberate across politics and markets in the decade to come.

Regardless, these high debt levels aren’t going anywhere and when the next crisis comes along, we’ll be back here talking about the same thing with zero lessons learned.

IMF on coronavirus and the global economy – damage this year; sharp, rapid rebound

  
  Analysis
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Comments from International Monetary Fund managing director Kristalina Georgieva over the weekend on the impact on the global economy

  • could damage global economic growth this year
  • a sharp and rapid economic rebound could follow
  • “There may be a cut that we are still hoping would be in the 0.1-0.2 percentage space”
  • full impact of the spreading disease would depend on how quickly it was contained – “I advise everybody not to jump to premature conclusions. There is still a great deal of uncertainty. We operate with scenarios, not yet with projections, ask me in 10 days”
  • If the disease is “contained rapidly, there can be a sharp drop and a very rapid rebound”, in what is known as the V-shape

IMF’s Georgieva: Uncertain situation is the new normal

  
  Analysis
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IMF chief, Kristalina Georgieva, speaks in Davos

Kristalina Georgieva
  • Uncertainty is the major downside risk for global economy
  • Wants to see governments stepping up action
  • The world is more shock-prone as it is interconnected currently
  • We are in a better place at the start of 2020 than in 2019
  • Sees signs of trade, industrial slowdown bottoming out
  • Consensus is that global rates will be low for longer
  • Fed, PBOC have policy space
  • Other countries need to look at fiscal tools more closely
Low growth, low rates. That is the new landscape that the world will have to deal with. And with central banks still injecting so much stimulus and being so cautious, we shouldn’t expect to see a crisis like the one in 2008-09 materialise.
However, any chance of major economies and the world returning back to what is perceived to be “normal” is probably not going to happen either.

IMF: Growth is worse but at least uncertainty is lower

  
Analysis, Economy
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IMF lowers 2019 global growth estimate for the sixth straight quarter

IMF lowers 2019 global growth estimate for the sixth straight quarter
2019 is over but the outlook for growth keeps getting worse. The IMF lowered its 2019 global growth forecast to 2.9% from 3.0% in October. It was the sixth consecutive cut to the 2019 outlook.
The 2021 forecast was also lowered to 3.4% from 3.6%.
On the upside, the IMF maintained its 2020 GDP forecast at 3.3% and said that economic uncertainty is diminished with risks “less skewed” toward negative outcomes, albeit still tilted to the downside.
The big loser in this round of forecasts was India with the 2020 forecast cut to 5.8% from 7.0% on declining credit growth.
Other highlights:
  • 2020 Eurozone GDP seen at 1.3% vs 1.4% in Oct due to manufacturing contraction in Germany
  • Boosts China 2020 GDP to 6.0% from 5.8% on trade deal
  • Cuts 2020 US GDP to 2.0% from 2.1%
  • UK forecast unchanged at 1.4%
For me, these forecasts don’t have much value on their own (as you can see from the frequent revisions) but they are a valuable way to visualize and interpret the evolving growth picture.

IMF trims 2020 global growth forecast to 3.3% from 3.4% previously in October

  
Analysis, Economy
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IMF attributes the slight downwards revision to a sharper-than-expected anticipated slowdown in India

  • Sees tentative signs that manufacturing and global trade are bottoming out
  • That is partially due to the US-China trade deal
  • Sees risks less tilted to the downside than in October
  • US-Iran tensions, social unrest and a flare-up in trade tensions are key concerns
  • 2021 global growth forecast seen at 3.4% (3.6% previously)
  • US 2020 growth forecast seen at 2.0% (2.1% previously)
  • China 2020 growth forecast seen at 6.0% (5.8% previously)
  • Euro area 2020 growth forecast seen at 1.3% (1.4% previously)
  • UK 2020 growth forecast seen at 1.4% (unchanged)
  • India 2020 growth forecast seen at 5.8% (7.0% previously)

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International Monetary Fund wants Indian government to be more credible, transparent on fiscal numbers

  
  Analysis
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New Delhi needs to become more “transparent” on the fiscal numbers as it is a “laggard” among the G20 peers on this front, a senior official from the International Monetary Fund said here on Wednesday.

The government has been missing its budgeted fiscal targets for the past few years and there is a need for a “credible fiscal consolidation” which is more ambitious as well, the official said, adding this is more so as government has not addressed how it will make up for the massive Rs 1.45 lakh crore tax giveaways in the form of corporate tax cuts.

The comments come amid allegations of the budget math not adding up with some pointing to a Rs 1.7 lakh crore hole in the estimates, and also over 100 economists questioning the official data computation.

“Fiscal transparency should be increased. It is fairly difficult for the private sector to get the full picture on fiscal standing,” the fund’s deputy director Anne-Mary Gulde said speaking at an NSE event here. 

“India is somewhat lacking in a programme on G20 data initiative on fiscal transparency where comparative countries have all made greater progress,” she added.

She said there is also a need for more credible fiscal consolidation as such a move will help reduce the relatively high level of debt and free up financial resources for the private sector. (more…)

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