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Reaching Net Zero Emissions

2 days ago

By Florence Jaumotte and Gregor Schwerhoff
عربي, 中文, Español, 日本語, Português, Русский
Climate action is gaining momentum. Since the 2015 Paris Agreement, countries have intensified climate action and many have committed to reach net zero emissions by 2050, meaning that any additional carbon emissions will be offset completely by carbon emissions withdrawn from the atmosphere.
However, the carbon budget, or maximum amount of emissions allowable, to limit global warming to well below 2°C is running out quickly. More frequent and intense disasters, a decline in agricultural productivity, and rising sea levels will only grow more common if this critical goal is not met.

Our analysis shows that delaying action on carbon pricing by 10 years would likely result in missing a mid-century net zero

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Taming Market Power Could (also) Help Monetary Policy

3 days ago

By Romain Duval, Davide Furceri, and Marina M. Tavares
Some central banks are currently debating whether to tighten monetary policy to fight inflationary pressures, after having eased decisively in response to the COVID-19 shock. In making such decisions, central bankers have to consider how much businesses and consumers will respond. The structure of the financial system and the future expectations of consumers and businesses are key drivers of how effective monetary policy actions will be. Yet there’s another, overlooked, driver: corporate market power.
New IMF staff research has found ever larger and more powerful companies are making monetary policy a less potent tool for managing the economy in advanced economies, all else equal.
Market power has risen in many advanced economies and

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Seizing the Opportunity for a Pro-Growth, Post-Pandemic World

4 days ago

By Geoffrey Okamoto
عربي, 中文, Español, Français, 日本語, Português, Русский
Since March 2020, governments have spent $16 trillion providing fiscal support amid the pandemic, and global central banks have increased their balance sheets by a combined $7.5 trillion. Deficits are the highest they have been since World War II and central banks have provided more liquidity in the past year than in the past 10 years combined. This was absolutely necessary — IMF research indicates that if policymakers had not acted, last year’s recession, which was the worst peacetime recession since the Great Depression, would have been three times worse.
That’s where we’ve come from, but where are we headed? In the year ahead, as more vaccines roll off the production line, more people get jabbed, and more economies

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The Resilience of Private Balance Sheets in Europe during COVID-19

9 days ago

By Estelle Xue Liu, Karim Foda, and Sebastian Weber
Español, Français, Português
One of the positive surprises about last year’s recession is how little damage it inflicted on average household and corporate balance sheets in Europe.
In the past, deep recessions were followed by protracted weakness as they left households and businesses with significantly higher debt and lower income and capital. So far this has not been the case with the COVID-19 crisis, largely thanks to the extraordinary policy response by governments and central banks.
As the recovery takes hold, however, policy makers will need to maintain support for the hardest hit segments of the economy and remain alert for signs of economic damage yet to emerge. Not all private balance sheets were equally resilient.
In new IMF

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Chart of the WeekCould Renewed Social Unrest Hinder the Recovery?

11 days ago

By Metodij Hadzi-Vaskov, Samuel Pienknagura, and Luca Ricci
Protests driven by the pandemic’s economic fallout are on the rise, with potentially long-lasting economic consequences.
Protests can be catalysts for political reform and social change. But what impact do they have on the economy?
According to the latest Global Peace Index, the number of riots, general strikes and anti-government demonstrations around the world have increased by a staggering 244 percent in the last decade. Lockdowns and fears of contagion forced a temporary lull. But in virtually every region of the world, demonstrators are making a comeback. Causes range from frustration over governments’ handling of the crisis to mounting inequality and corruption—factors that tend to heighten existing tensions and

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What COVID-19 Can Teach Us About Mitigating Climate Change

15 days ago

By Oya Celasun, Florence Jaumotte, and Antonio Spilimbergo
While the COVID-19 pandemic continues to ravage the world, climate change—a crisis that can cause even greater destruction—looms. All crises teach us lessons, but the pandemic has gone further: it has reminded us about the power of nature. A recent Ipsos poll conducted globally for the IMF found that 43 percent of people surveyed reported being more worried about climate change now than they were before the pandemic, with only 7 percent saying they are less worried. The heightened public awareness about the dangers of unmitigated climate change make this an important moment for policymakers to enact bold reforms. But many challenges lie ahead.

First, let’s note some of the similarities between COVID-19 and climate change. Human

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Urgent Action Needed to Address a Worsening ‘Two-Track’ Recovery

17 days ago

By Kristalina Georgieva
عربي, 中文, Español, Français, 日本語, Português, Русский
When G-20 finance ministers and central bank governors gather in Venice this week, they can take inspiration from the city’s unbreakable spirit.
As the world’s first international financial center, Venice has faced the vagaries of economic fortunes over centuries, while being directly affected by climate change. This extraordinary resilience is needed more than ever as policymakers continue to face extraordinary challenges.
The good news is that the global recovery is progressing broadly in line with the IMF’s April projections of 6 percent growth this year. After a crisis like no other, we are seeing in some countries a recovery like no other, propelled by a combination of strong fiscal and monetary policy

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Sub-Saharan Africa: We Need to Act Now

26 days ago

By Kristalina Georgieva and Abebe Aemro Selassie
中文, Español, Français, Português
Sub-Saharan Africa is in the grips of a third wave of COVID-19 infections that threatens to be even more brutal than the two that came before.
This is yet more evidence of a dangerous divergence in the global economy. One track for countries with good access to vaccines, where strong recoveries are taking hold. And another for those countries that are still waiting and at risk of falling further behind.
The growth of infections in sub-Saharan Africa is now the fastest in the world, with an explosive trajectory that is outpacing the record set in the second wave. At this pace, this new wave will likely surpass previous peaks in a matter of days—and in some countries, infections are already more than double, or

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Four Facts about Soaring Consumer Food Prices

June 24, 2021

By Christian Bogmans, Andrea Pescatori, and Ervin Prifti
Rising world food prices for producers are making headlines and causing concerns among the public. The most recent data show a moderation in consumer food price inflation globally, but as we explain below, that could change in the coming months. This would only add to the high prices that consumers in many countries already lived through last year.
If prices eventually rise again, there will likely be sizeable differences between countries. Due to various factors, it is probable that the effect would be felt most by consumers in emerging markets and developing economies still wrestling with the effects of the pandemic.

Emerging markets and low-income countries are more vulnerable to food price shocks.

Fact #1: Food price inflation

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A Proposal to Scale Up Global Carbon Pricing

June 18, 2021

By Vitor Gaspar and Ian Parry
Between one quarter and one half. That’s how much carbon dioxide (CO2) and other greenhouse gases must fall over the next decade to keep alive the goal of restricting global warming to below 2°C. The fastest and most practical way to achieve this is by creating an international carbon price floor arrangement.

Climate change presents huge risks to the functioning of the world’s economies.

This matters to the IMF because climate change presents huge risks to the functioning of the world’s economies. The right climate policies can address these risks and also bring tremendous opportunities for transformative investments, economic growth, and green jobs—so much so that our Board recently approved proposals to include climate change in our regular country

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How to Attract Private Finance to Africa’s Development

June 14, 2021

By Abebe Aemro Selassie, Luc Eyraud, and Catherine Pattillo
中文, Français
African economies are at a pivotal juncture. The COVID-19 pandemic has brought economic activity to a standstill. Africa’s hard-won economic gains of the last two decades, critical in improving living standards, could be reversed.
High public debt levels and the uncertain outlook for international aid limit the scope for growth through large public investment programs. The private sector will have to play more of a role in economic development if countries are to enjoy a strong recovery and avoid economic stagnation. Heads of state from Africa made this one of their resounding messages during the recent summit on “Financing African Economies” held in Paris in May.
Infrastructure—both physical (roads, electricity) and

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Getting Back to Growth

June 10, 2021

By Lone Engbo Christiansen, Ashique Habib, Margaux MacDonald, and Davide Malacrino
عربي, Español, 日本語, Português, Русский
Producing and consuming more goods and services for the same amount of work sounds too good to be true. In fact, it’s entirely possible. Higher productivity is one of the key ingredients to higher economic growth and incomes. It’s all about how workers become more productive.
For many of us, the COVID-19 pandemic has changed the way we work and spend. The question is how these changes will affect our productivity, both now and into the future.

The pandemic accelerated the shift toward digitalization and automation.

While it’s difficult to forecast long-run productivity, particularly in the current environment, there are two key channels through which the pandemic

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The Benefits of Setting a Lower Limit on Corporate Taxation

June 9, 2021

By Aqib Aslam and Maria Coelho
On June 5, 2021, Finance Ministers from the Group of Seven major industrialized nations committed to a global minimum corporate tax rate on multinationals of at least 15 percent. While there are a number of details yet to be hammered out in broader global discussions, this historic agreement heralds an important step forward on the road to international corporate tax reform.
It also highlights the role minimum taxes can play at the global level to help reverse nearly four decades of falling global corporate tax rates and reduce the incentives for large multinational firms to shift profits to low-tax jurisdictions to reduce their worldwide tax liability.
Our new study examines how different types of domestic minimum tax regimes can help countries preserve

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Chart of the WeekFour Factors Behind the Metals Price Rally

June 8, 2021

By Martin Stuermer and Nico Valckx
As economies reopen in various parts of the world, the price of some commodities has soared, including the prices of prominent industrial metals. The extent to which the metals price rally may lose steam depends on how multiple factors will play out.
As our latest chart of the week shows, metals prices have increased by 72 percent relative to their pre-pandemic levels—reaching a nine-year high in May (in inflation adjusted terms). The increase has been broad-based across industrial metals—copper is up 89 percent in May (year-over-year), iron ore is up 116 percent, and nickel is up 41 percent. The prices of most agricultural and energy commodities are also tracking upward, but at a slower rate. Energy commodities (oil, coal, and natural gas), in

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The Next Move: Consequences for Emerging Markets

June 2, 2021

By Gita Bhatt
We focus this issue of Finance & Development on the road ahead for emerging markets, a label frequently applied to economies in the middle—neither advanced nor low-income. Because of their growing systemic relevance, this group of countries helps anchor global stability. Yet, as we drill down and define their characteristics, we find a widely diverse set of economies of varying sizes and growth rates that face different prospects, priorities, and challenges.
Some, like China, have managed to emerge quickly from the present crisis. Others may struggle for years to deal with the pandemic’s aftereffects.
Amid a multispeed economic recovery—including within countries and across sectors, age groups, genders, and skill levels—this issue explores several cross-cutting themes for

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CHART OF THE WEEKHow to Reduce COVID-19’s Unequal Effects Across Workers

June 1, 2021

By Jorge Mondragon and Marina M. Tavares
Lower-skilled and young workers were among the hardest hit from the pandemic, suffering job losses in record numbers last year. Some of those jobs may never reappear as economies readjust to a post-pandemic world. Longer-term changes appear likely in terms of the mix of jobs in the economy—some sectors and occupations will permanently shrink, and others will expand. With many unemployed workers still struggling to regain their pre-pandemic salaries and other fundamental shifts underway, incomes across workers are likely to diverge further.
As shown in our latest chart of the week, research from the April 2021 World Economic Outlook finds that job retention support (shown by the blue line) can more quickly reduce the rise in income inequality in the

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Making Affordable Rental Housing Part of Europe’s Recovery

May 26, 2021

By Alfred Kammer, Andrea Schaechter, and Andreas Tudyka
 Español, Português
Already before the pandemic, many store or restaurant workers living in a major city in Europe had to spend more than half of their household’s income on rent. During the pandemic, many of them have seen their incomes fall, pushing up their share of income going to rent. Since low-income and young renters tend to work more frequently in contact-intensive sectors or hold insecure jobs, government policies are needed to make sure that these households do not get left behind as economies recover from the COVID-19 crisis.

During the past decade, rental housing has become less affordable across many European economies.

Worrying trends
During the past decade, rental housing has become less affordable across many

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Fit for Purpose—Adapting IMF Advice to a New Economic Landscape

May 24, 2021

By Fabian Bornhorst and Ceyla Pazarbasioglu
عربي, Русский
The International Monetary Fund is responding to the policy challenges of a fast-changing global economy still reeling from the COVID-19 crisis: it is modernizing the way it provides its regular policy advice to member countries—a process known as surveillance.
The regular health check of members’ economies, known as the Article IV consultations, will continue to cover fiscal, monetary, exchange rate and financial issues, which are at the heart of the Fund’s work.

The Fund’s policy advice is evolving.

In the future, we will systematically integrate issues that have substantial macroeconomic impact such as inequality, climate change, and digital technology, so as to better deliver on our surveillance mandate.
The tailored and

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A Proposal to End the COVID-19 Pandemic

May 21, 2021

By Kristalina Georgieva, Gita Gopinath, and Ruchir Agarwal
Български, Español, Русский
Many countries have stepped up in the global fight against the pandemic, as have institutions such as the World Health Organization, the World Bank, Gavi (the Global Alliance for Vaccines and Immunization), the African Union, and others.
Yet, more than a year into the COVID-19 crisis, new cases worldwide are higher than ever. Urgent action is needed to arrest the rising human toll and economic strain.

Ending the pandemic is a solvable problem but requires further coordinated global action.

As the IMF has warned, economic recoveries are diverging dangerously. The disparities will widen further between wealthy countries that have widespread access to vaccines, diagnostics, and therapeutics, and poorer

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Checking the Receipts from Pandemic-Related Spending

May 20, 2021

By Chady El Khoury, Jiro Honda, Johan Mathisen, and Etienne Yehoue
Governments around the world are playing a crucial role in providing lifelines to people and firms to help combat the pandemic and its economic fallout. To support the effectiveness of these efforts, it is important that such spending be subject to adequate transparency and accountability.

The IMF presses for better governance through greater transparency.

To this end, the IMF has called for ensuring transparency and accountability in pandemic-related spending, so that the money and measures help the people who need it most, using the adage, “spend what you must, but keep the receipts.”
The IMF presses for better governance through greater transparency, and has sought specific governance measures for countries receiving

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How Strengthening Standards for Data and Disclosure Can Make for a Greener Future

May 13, 2021

By Caio Ferreira, Fabio Natalucci, Ranjit Singh, and Felix Suntheim
Imagine you plan to invest your savings and are looking for a firm or sector with a sustainable business model or a project that can make a real difference in the transition to a low-carbon economy. Where do you get reliable information to assess and compare projects from different companies?

Data gaps make it difficult to assess firms’ exposure to climate risk.

To give investors access to decision-useful information to effectively price and manage climate risks, there is an urgent need to strengthen the “climate information architecture.” There are three building blocks needed to support it: (i) high-quality, reliable, and comparable data, (ii) a harmonized and consistent set of climate disclosure standards, and (iii) a

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The Policymaker’s Trilemma

May 12, 2021

By Abebe Aemro Selassie and Andrew Tiffin
中文, Español, Français, 日本語,  Português, Русский
Imagine you’re a policymaker in sub-Saharan Africa. You’ve been charged with lifting your country out of the worst health crisis in living memory, and nobody around you knows when it will end—the second wave that gripped the region earlier in the year has eased, but many countries are nonetheless bracing for further waves as winter approaches.
One piece of good news is that a global recovery is well underway. Key economies are rebounding sharply, global trade has improved, commodity prices are higher, and investment flows have resumed.
The bad news is that, for sub-Saharan Africa, at least, near-term growth prospects are somewhat more subdued. And as long as widespread vaccination remains out of

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Chart of the WeekHow Stock Markets Respond to Social Unrest

May 10, 2021

Philip Barrett and Sophia Chen
What happens to stock markets when social unrest—such as mass protests and riots—occurs? Are investors scared-off by the disorder? Or are they buoyed by the prospect of positive, popular change in response to unrest?
Our chart of the week, drawn from our recent IMF staff working paper, uses a new dataset of 156 social unrest events during 2011–20 to shed some light on these questions. It shows that in countries with more open and democratic institutions, social unrest events have a negligible impact on stock market returns (blue line). But in countries with more authoritarian regimes, the effect is large and negative: on average, stock market returns fall by 2 percent within 3 days, and by about 4 percent in the following month (black line).
These findings

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Economies in the Financial Spotlight in 2021

May 6, 2021

By IMFBlog
Throughout 2020 and into 2021, the global financial system withstood the effects of the global pandemic and economic lockdowns due to unprecedented policy support. Strong financial systems that are well regulated and well supervised help maintain financial stability. But like a well calibrated engine on a car, maintenance is key. Each year the IMF takes a look under the hood of select economies, which helps to unmask vulnerabilities that could present bigger problems down the road.
The Financial Sector Assessment Program, or “FSAP” as it’s widely known, helps to assess financial vulnerabilities and make financial systems stronger and better able to withstand adverse events. The IMF considers country-specific features of financial systems and tailors its analysis to the needs

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Chart of the WeekUS Dollar Share of Global Foreign Exchange Reserves Drops to 25-Year Low

May 5, 2021

By Serkan Arslanalp and Chima Simpson-Bell
عربي, 中文, Español, Português, Русский
The share of US dollar reserves held by central banks fell to 59 percent—its lowest level in 25 years—during the fourth quarter of 2020, according to the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) survey. Some analysts say this partly reflects the declining role of the US dollar in the global economy, in the face of competition from other currencies used by central banks for international transactions. If the shifts in central bank reserves are large enough, they can affect currency and bond markets.
Our Chart of the Week looks at the recent data release from a longer-term perspective. It shows that the share of US dollar assets in central bank reserves dropped by 12 percentage

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COVID-19: The Moms’ Emergency

April 30, 2021

By Kristalina Georgieva, Stefania Fabrizio, Diego B. P. Gomes, and Marina M. Tavares
عربي , 中文 , Español, Français , 日本語 , Português , Русский 
A year ago, the world changed. While the pandemic’s effect on workers has varied worldwide, the new reality has left many mothers scrambling. With schools and daycares closed, many were forced to leave their jobs or cut the hours they worked.
New IMF estimates confirm the outsized impact on working mothers, and on the economy as a whole. In short, within the world of work, women with young children have been among the biggest casualties of the economic lockdowns.
Mothers of young children have been disproportionately affected by the lockdown.
Three countries—the United States, the United Kingdom, and Spain—illustrate the varied impact of the

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COVID-19: The Moms’ Emergency

April 30, 2021

By Kristalina Georgieva, Stefania Fabrizio, Diego B. P. Gomes, and Marina M. Tavares
عربي, 中文, Español, Français, 日本語, Português, Русский
A year ago, the world changed. While the pandemic’s effect on workers has varied worldwide, the new reality has left many mothers scrambling. With schools and daycares closed, many were forced to leave their jobs or cut the hours they worked. New IMF estimates confirm the outsized impact on working mothers, and on the economy as a whole. In short, within the world of work, women with young children have been among the biggest casualties of the economic lockdowns.

Mothers of young children have been disproportionately affected by the lockdown.

Three countries—the United States, the United Kingdom, and Spain—illustrate the varied impact of the

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Achieving the Sustainable Development Goals Will Require Extraordinary Effort by All

April 29, 2021

By Abdelhak Senhadji, Dora Benedek, Edward Gemayel, and Alexander Tieman
عربي, 中文, Español, Français, 日本語, Português, Русский
The pandemic’s impact on the world’s poor has been especially harsh. COVID-19 may have pushed about 100 million people into extreme poverty in 2020 alone, while the UN warns that in some regions poverty could rise to levels not seen in 30 years. The current crisis has derailed progress toward basic development goals, as low-income developing countries must now balance urgent spending to protect lives and livelihoods with longer-term investments in health, education, physical infrastructure, and other essential needs.
In a new study, we propose a framework for developing countries to evaluate policy choices that can raise long-term growth, mobilize more revenue,

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Understanding the Rise in Long-Term Rates

April 22, 2021

By Tobias Adrian, Rohit Goel, Sheheryar Malik, Fabio Natalucci
عربي, Español, Français, Português, Русский
The rise in long-term US interest rates has become a focus of global macro-financial concerns. The nominal yield on the benchmark 10-year Treasury has increased about 70 basis points since the beginning of the year. This reflects in part an improving US economic outlook amid strong fiscal support and the accelerating recovery from the COVID-19 crisis. So an increase would be expected. But other factors like investors’ concerns about the fiscal position and uncertainty about the economic and policy outlook may also be playing a role and help explain the rapid increase early in the year.
Because US bonds are the basis for fixed-income pricing, and affect almost any security around the

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A Future with High Public Debt: Low-for-Long Is Not Low Forever

April 20, 2021

By Marcos Chamon and Jonathan D. Ostry
Many countries are experiencing a combination of high public debt and low interest rates. This was already the case in advanced economies even prior to the pandemic but has become even starker in its aftermath. A growing number of emerging market and developing economies are likewise enjoying a period of negative real rates—the interest rate minus inflation—on government debt. The IMF has called on countries to spend as much as they can to protect the vulnerable and limit long-lasting damage to economies, stressing the need for spending to be well targeted. This is especially critical in emerging market and developing economies, which face tighter constraints and associated fiscal risks, where greater prioritization of spending is of the essence.

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