Coronavirus pandemic economic fallout ‘way worse than the global financial crisis,’ IMF chief says

Greece: Much Progress, but Action Needed to Address Crisis Legacies, Boost Inclusive Growth

IMF Executive Board Concludes 2018 Article IV Consultation with Greece

July 31, 2018

On July 27, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Greece. 

Following a deep and protracted contraction, growth has finally returned to Greece. The large macroeconomic stabilization effort, structural reforms, and a better external environment contributed to an increase in real GDP of 1.4 percent in 2017, helped also by substantial support from European partners, which secured medium-term sustainability and restored market access. However, stock legacy issues persist, as unemployment remains high and public and private balance sheets remain impaired. 

The recovery is projected to strengthen in the near-term, with growth expected to reach 2 percent this year and 2.4 percent in 2019, and with unemployment declining as the output gap closes. However, external and domestic risks are tilted to the downside, including from slower trading partner growth, tighter global financial conditions, regional instability, the domestic political calendar, and risks of reform fatigue. Moreover, in the long term, population aging is expected to weigh down on potential growth, increasing the need to foster productivity.  

Executive Board Assessment[2]

Executive Directors commended the authorities for important reforms and policy choices in recent years that have largely eliminated fiscal and current account imbalances, stabilized the financial sector, reduced unemployment, and restored growth. These substantial efforts, along with welcome debt relief by European partners, have put Greece on a path to successfully exit the European Stability Mechanism-supported program in August 2018.

While a recovery is underway, Directors stressed that significant crisis legacies and social pressures remain, and the risks to the outlook remain on the downside. To address these issues, they encouraged further efforts to rebalance fiscal policy, strengthen bank balance sheets, and reform product and labor markets to boost sustainable and inclusive growth. 

Directors agreed that, given the significant adjustment to date, Greece does not require further fiscal consolidation, while also noting that achieving the high primary balance targets comes at a cost to growth, including through high taxes and constrained social and investment spending. They supported a shift to a more growth-friendly and inclusive fiscal policy mix, and welcomed the authorities’ commitment to fully implement the pre-legislated fiscal package in 2019 and 2020. Directors called for further fiscal rebalancing to reduce direct taxes and increase targeted social spending to support growth and reduce still-high poverty. 

Directors urged the authorities to accelerate efforts to...

IMF: Cyprus : Second Post-Program Monitoring Discussions-Press Release; Staff Report and Statement by the Executive Director for Cyprus

6 June 2018

Summary

The economic recovery has gathered further momentum. Strong GDP growth has supported employment. While the current account deficit has widened reflecting the high import content of demand, persistent price and wage moderation have sustained competitiveness. Improving cyclical conditions contributed to a sizable primary fiscal surplus and a decline in the public debt ratio. 

However, the economy is still burdened with legacies from the crisis. Despite accelerating growth, private sector debt continues to be very high reflecting the slow pace of deleveraging. Banks’ asset quality remains poor, weighing adversely on profitability. To support the position of the Cyprus Cooperative Bank and deal with NPLs more broadly across the banking system, the government has taken actions aimed at encouraging consolidation and reinforcing banks’ balance sheets.

IMF Statement on Tunisia

• Economic growth is picking up, but risks to macroeconomic stability have also risen. 
• Strong policy and reform implementation will lower risks to the budget and decelerate inflation.  
• Discussions on the near-term economic reform priorities will continue in Washington during the IMF’s Spring Meetings from April 20–22.

An International Monetary Fund (IMF) staff team, led by Bjoern Rother, visited Tunisia from April 4–11 to discuss the country’s recent economic developments and the authorities’ policy plans under Tunisia’s economic reform program supported by a four-year IMF Extended Fund Facility (EFF) arrangement (see Press Release 16/238):...

CNBC: IMF’s Christine Lagarde praises the ‘courage’ of Arab countries undergoing economic reform

IMF chief Lagarde: 'Global growth forecasts are fairly good'

IMF Managing Director Christine Lagarde Meets Greek Prime Minister Alexis Tsipras in Davos

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), made the following statement today in Davos, Switzerland:

“It was a pleasure to meet with Prime Minister Tsipras in Davos today. I congratulated him on the progress Greece has achieved, a sentiment that was also reflected in the recent Eurogroup statement, and assured the Prime Minister of the Fund’s continued support for Greece’s adjustment program. 

I also underscored that the completion of the reform agenda and provision of debt relief by Greece’s European partners are essential to support sustainable growth and a successful exit from official financing later this year. The Prime Minister and I agreed to work together toward these shared goals.”

IMF: World Enters Critical Period of Intensified Risks in 2018

• Structural and interconnected nature of risks in 2018 threaten the very system on which societies, economies and international relations are based, according to The Global Risks Report 2018
• The positive economic outlook gives leaders the opportunity to tackle systemic fragility affecting societies, economies, international relations and the environment, according to the report
• Environmental risks dominate the Global Risk Perception Survey for the second year running; when we asked about risk trajectories in the coming year, 59% of answers pointed to increasing risks
• Read the full report here

London, United Kingdom, 17 January 2018 — The prospect of strong economic growth in 2018 presents leaders with a golden opportunity to address signs of severe weakness in many of the complex systems that underpin our world, such as societies, economies, international relations and the environment. That is the message of The Global Risks Report 2018, published by the World Economic Forum today.

 

The report – which every January shares the perspectives of global experts and decision-makers on the most significant risks that face the world – cautions that we are struggling to keep up with the accelerating pace of change. It highlights numerous areas where we are pushing systems to the brink, from extinction-level rates of biodiversity loss to mounting concerns about the possibility of new wars.

 

Our annual Global Risks Perception Survey (GRPS) suggests that experts are preparing for another year of heightened risk. When we asked nearly 1,000 respondents for their views about the trajectory of risks in 2018, 59% of their answers pointed to an intensification of risks, compared with 7% pointing to declining risks.

 

A deteriorating geopolitical landscape is partly to blame for the pessimistic outlook in 2018, with 93% of respondents saying they expect political or economic confrontations between major powers to worsen and nearly 80% expecting an increase in risks associated with war involving major powers.

 

However, as in 2017, the environment was by far the greatest concern raised by experts. Among the 30 global risks the experts were asked to prioritize in terms of likelihood and impact, all five environmental risks – extreme weather; biodiversity loss and ecosystem collapse; major natural disasters; man-made environmental disasters; and failure of climate-change mitigation and adaptation – were ranked highly on both dimensions. Extreme weather events were seen as the single most prominent risk.

 

“A widening economic recovery presents us with an opportunity that we cannot afford to squander, to tackle the fractures that we have allowed to weaken the world’s institutions, societies and environment. We must take seriously the risk of a global systems breakdown. Together we have the resources and the new scientific and technological knowledge to prevent this. Above all, the challenge is to find the will and momentum to work together for a shared future,” said Professor Klaus Schwab, Founder and Executive Chairman, World Economic Forum.

 

According to the GRPS, cyber threats are growing in prominence, with large-scale cyberattacks now ranked third in terms of likelihood, while rising cyber-dependency is ranked as the second most significant driver shaping the global risks landscape over the next 10 years.

 

John Drzik, President of Global Risk and Digital, Marsh said: “Geopolitical friction is contributing to a surge in the scale and sophistication of cyberattacks. At the same time cyber exposure is growing as firms are becoming more dependent on technology. While cyber risk management is improving, business and government need to invest far more in resilience efforts if we are to prevent the same bulging ‘protection’ gap between economic and insured losses that we see for natural catastrophes.”

 

Economic risks, on the other hand, feature less prominently this year, leading some experts to worry that the improvement in global GDP growth rates may lead to complacency about persistent structural risks in the global economic and financial systems. Even so, inequality is ranked third among the underlying risk drivers, and the most frequently cited interconnection of risks is that between adverse consequences of technological advances and high structural unemployment or under-employment.

“Future Shocks”...

IMF: Ensuring a Sustainable Global Recovery

IMF First Deputy Managing Director David Lipton

Asian Financial Forum, Hong Kong

January 15, 2018

Ladies and gentlemen,

Thank you for your kind welcome to Hong Kong. I am honored to speak at the opening of this conference.

I would like to offer an overview of the outlook for the global economy and the Asia-Pacific region. And since the fortunes of both are so closely linked to China, I will also outline some key policy challenges facing Beijing.

Let’s start with the big picture. The IMF will issue an update to our World Economic Outlook next week. The bottom line is that the cyclical recovery in the global economy is going from strength to strength. The signs point to faster growth across all regions.

That said, we must also recognize that the global economy is in a late stage of the long and gradual recovery from the global financial crisis. With economic slack in advanced economies diminishing, it is not clear how long the good news will continue. 

That is why the IMF’s Managing Director, Christine Lagarde, has been saying that the time to fix the roof is when the sun is shining. Our meaning is clear: now is the time to address vulnerabilities and structural issues that could impede sustained growth, and to take steps to enable stronger growth once cyclical recovery is no longer driving the economy.

Investment and Trade Rise

Right now, the sun is shining on the global economy. Capital-intensive investment and consumer demand are rising.  Because investment is import intensive, that is lifting world trade at a rate well above GDP growth, which helps spread recovery more broadly across the globe. Unemployment in many advanced economies is falling. Inflation remains subdued even though the major central banks continue to pursue the accommodative monetary policies.

European growth is not only rebounding, it is more evenly distributed than in many years. The U.S. is experiencing a rebound that should receive an additional, short-term lift from tax reform.

Asia contributes two-thirds of global growth. With strong consumption and investment, rising exports, and steady capital inflows, the outlook for the region remains bright.

China alone is providing one-third of global growth. Japan has been growing above potential for several quarters. The Korean economy has held up well despite the tensions on the peninsula. India is reclaiming its place as a growth leader after a short slowdown. And the ASEAN-5 have gained momentum in response to higher investment and increased exports.

Challenges and Risks...

IMF: Canada's Balancing Act

IMF Executive Board Concludes 2017 Article IV Consultation with Argentina

On December 18, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Argentina.

Argentina’s government has unwound multiple distortions and made important progress in restoring integrity and transparency in public sector operations. These policy changes have put the economy on a stronger footing and corrected many of the most urgent macroeconomic imbalances. Argentina is experiencing a solid recovery from last year’s recession and, even in the face of planned fiscal consolidation and ongoing efforts at disinflation, growth is expected to consolidate in the coming years. Inflation continues to fall, albeit at a slower pace than targeted by the central bank.

Private consumption strengthened in 2017, supported by greater real wages and buoyant credit growth, and private investment is also picking up. With stronger domestic demand, the trade surplus turned into a deficit and the current account deficit increased. Annual inflation has declined from its peak in 2016, but remained relatively resilient and inflation expectations moved up, prompting the central bank to raise interest rates. The general government fiscal deficit is expected to increase this year, despite the fall of the primary deficit, and its financing led to a rapid rise in foreign currency borrowing. The slower-than-targeted decline in inflation and significant foreign inflows have put upward pressure on the exchange rate, which in real terms has appreciated by about 3 percent so far in 2017.

Going forward, GDP growth is expected to consolidate, inflation inertia will slowly subside, and the fiscal deficit will gradually fall. Private consumption is expected to strengthen in 2018–19 as real wages recover from the decline in 2016. The federal primary fiscal deficit is expected to fall by 2 percent of GDP by 2019, while provinces are projected to lower their primary deficit, in line with the targets announced by the authorities. This is likely to weigh against economic growth in the next two years, holding it to around 2½ percent. Continued sizable foreign borrowing and real appreciation pressures of the currency are expected to cause the current account deficit to increase further. As wage negotiations continue to become more forward-looking, inflation expectations should move lower, creating space for an eventual reduction in policy rates. While still high real interest rates will act as headwind to growth, they should facilitate a decline in inflation towards single-digit levels.

Executive Board Assessment [2]...

IMF Executive Board Concludes 2017 Article IV Consultation with Bolivia

On December 13, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation^[1] with Bolivia, and considered and endorsed the staff appraisal without a meeting.[2]

Bolivia achieved impressive economic and social advances from 2006–2014. During that period, real GDP averaged about 5.1 percent annually and the share of population living in the extreme poverty fell by one half. These notable gains now face challenges related to the impact of lower commodity prices. Since the decline in natural gas and minerals prices in 2014, the government has implemented counter-cyclical macro policies and pursued their ambitious state-led development plan to support growth and further enhance social and economic development. While growth has remained robust, this approach has contributed to large fiscal and external current account deficits and foreign reserve losses.

Real GDP is expected to grow by 4 percent in 2017, relatively strong by regional standards. Accommodative fiscal policy, strong credit growth, and robust private consumption are expected to continue supporting activity while the fiscal and external current account deficits are likely to persist in the medium term. With weak private investment and the end of the commodity boom, growth is forecast to moderate gradually to 3.7 percent in the medium term. Key risks to this outlook include failure to discover new natural gas fields, further dollar strength, or lower-than-expected gas and minerals prices.

Executive Board Assessment[3]...

IMF Executive Board Concludes 2017 Article IV Consultation and Completes the Second Review Under the ECF for the Islamic Republic of Afghanistan

On December 8, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with the Islamic Republic of Afghanistan and completed the second review of the arrangement under the Extended Credit Facility (ECF) for Afghanistan. [2]

Since 2002, with financial and security support from the international community, Afghanistan has made important strides in rebuilding its economy. Nonetheless, important challenges remain as the country remains conflict-affected, poor, and aid-dependent. While macroeconomic policies have been broadly successful in maintaining fiscal and external sustainability, over time they need to prepare for lower external support. The authorities should support growth by strengthening institutions, addressing corruption, building up physical and human capital, developing the financial sector, making access to financial services more inclusive, and improving the business climate.

Real GDP grew by 2.4 percent in 2016 thanks to higher agricultural output, up from 1.3 percent in 2015. For 2017, growth is projected at 2.5 percent and at 3 percent for 2018. This is below the rate of growth needed to reduce unemployment, and is contingent on an improvement in confidence, implementation of reforms, and continued strong donor support. Consumer price inflation remains moderate and is expected to average 6 percent in 2018. Afghanistan has made progress in strengthening the country’s anti-corruption framework and its efforts in anti-monetary laundering and counter financing of terrorism (AML/CFT) resulted in the recent exit from the Financial Action Task Force’s (FATF) monitoring process.

Executive Board Assessment [3]...

IMF Statement on the Efforts to Fight Corruption in Ukraine

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), made the following statement today in Washington, D.C.:

“We are deeply concerned by recent events in Ukraine that could roll back progress that has been made in setting up independent institutions to tackle high-level corruption, including the National Anticorruption Bureau of Ukraine (NABU) and the Special Anticorruption Prosecutor’s Office (SAPO). Fighting corruption is a key demand of the Ukrainian society, is crucial to achieving stronger and equitable growth, and is part of the government’s commitment under the program with the IMF.

“We urge the Ukrainian authorities and parliament to safeguard the independence of NABU and SAPO. We also urge the authorities to move quickly with legislation to operationalize an independent anticorruption court consistent with the recommendations of the Venice Commission of the Council of Europe, which is essential to credibly adjudicate high-level corruption cases.”

IMF Executive Board Completes the First Review of the Extended Arrangement under the Extended Fund Facility for Georgia

Press Briefing by Gerry Rice, Director, IMF Communications Department (30 Nov 2017)

IMF Statement at the Conclusion of Staff Visit to Ecuador

An IMF delegation comprised of the IMF’s Director of the Western Hemisphere Department, Mr. Alejandro Werner, and the Mission Chief for Ecuador, Ms. Anna Ivanova visited Quito to meet with the Ecuadorian authorities and hear the views of the new administration on the economic policies and priorities for the country. At the conclusion of the visit Mr. Werner issued the following statement:

“It was a pleasure to be in Ecuador and have the privilege to meet President Lenin Moreno. We also had very productive meetings with Finance Minister De La Torre and Central Bank General Manager Veronica Artola. The meetings were an opportunity to discuss the economic outlook for the country and the authorities' policy priorities for the period ahead. 

“It is clear that the economy is...

IMF: Europe: From Recovery to Resurgence?

IMF First Deputy Managing Director David Lipton

London

November 14, 2017

Good afternoon. Thanks to UBS for inviting me to this event. I would like to set the stage for your discussions here today and tomorrow by offering a few IMF perspectives on issues that Europe is grappling with these days. 

Introduction 

Let me start with an overview of where the European economy stands in the effort to move beyond financial crisis, economic retrenchment, and political realignment and on to growth. Then, I’m going to look ahead to policies which can help Europe sustain growth momentum—and to build defenses that will be needed against the next shock. 

My basic point is something that the IMF has been saying:  today’s recovery offers an opportunity to fix the roof while the sun is shining. But the moment also has a deeper historical resonance.  In the wake of the financial crisis, we are at a turning point:  reforms and a renewed, pragmatic commitment to the next stage of cooperation could propel Europe’s economy to resurgent prosperity. 

That comment may have you asking, “Does this IMF guy realize he is speaking in London, in 2017?

A reasonable question.

I won’t attempt to explore the political ramifications of Brexit. Much has been said and the choices are coming into focus.  While it remains difficult to predict all the consequences, the prospect of Brexit surely concentrates our minds on the future of the financial system architecture.  And on the question of how to avoid fragmentation of banking and capital markets, which would prove costly.  With the untangling of the markets and institutions whose Euro-based lifeblood flows through London, it will be essential to address the where’s and how’s of the financial integration and oversight capacity that the EU-27 will require. 

I will come back to the subject of financial architecture. But not to get ahead of myself, let’s first take a look at the current economic situation.

Global and European Economic Developments...

IMF Staff Completes 2017 Article IV and Extended Fund Facility Second Review Mission to Egypt

An International Monetary Fund (IMF) team led by Mr. Subir Lall visited Cairo from October 25 to November 9, 2017, to hold discussions on the 2017 Article IV Consultation with Egypt and the second review of Egypt’s economic reform program supported by a three-year IMF Extended Fund Facility (EFF—see Press Release No. 16/501).

At the end of the mission Mr. Lall issued the following statement:

“The IMF staff team and the Egyptian authorities have reached a staff-level agreement on the second review of Egypt’s economic reform program, which is supported by the IMF’s SDR 8.597 billion (about $12 billion) arrangement. The staff-level agreement is subject to approval by the IMF’s Executive Board. Completion of the review would make available SDR 1,432.76 million (about US$2 billion), bringing total disbursements under the program to about US$6 billion.

“The staff-level agreement on the second review reaffirms the authorities’ commitment to their reform program supported by the IMF. Egypt’s economy continues to perform strongly, and reforms that have already been implemented are beginning to pay off in terms of macroeconomic stabilization and the return of confidence. While the reform process has required sacrifices in the short term, seizing the current moment of opportunity to transform Egypt into a dynamic, modern, and fast-growing economy will improve the living standards and increase prosperity for all Egyptians.

“Egypt’s growth picked up during fiscal year 2016/17, with GDP rising by 4.2 percent compared to the projected 3.5 percent. Meanwhile,...