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Time is Ripe for Innovation in the World of Sovereign Debt Restructuring

4 days ago

By Peter Breuer and Charles Cohen
中文, Español, Français, Português, Русский 
When corporations have too much debt and need to restructure i, creditors often end up exchanging bonds or loans for stocks. They trade the guaranteed payout of a fixed-income investment for an equity position whose return depends on the company’s future results. In other words, investors accept to share risk. Could a similar mechanism be applied when a sovereign nation has to restructure its debt, tying payouts to its future economic performance? New IMF staff research looks at possible innovative sovereign debt instruments that could do both: help creditors and debtors reach agreement on how to restructure debt by sharing some upside potential, and make a country’s debt portfolio more resilient to future

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Continued Strong Policy Action to Combat Uncertainty

4 days ago

By Kristalina Georgieva
Español, Français, 日本語, Português, Русский 
As G20 leaders meet virtually this week, the global economy faces a critical juncture. Countries have started to climb back from the depths of the COVID-19 crisis. But the resurgence in infections in many economies shows just how difficult and uncertain this ascent will be.
The good news is the significant progress on vaccine development. While there are many caveats, this raises hopes of vanquishing the virus that has taken more than a million lives and caused tens of millions of job losses.

Multilateral efforts are vital to help the poorest economies through the crisis.

The not-so-good news is the severity of the pandemic and its negative economic impact. Last month, the IMF projected a historic global GDP contraction

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Chart of the WeekIMF Lending Lifeline: Addressing Urgent Financing Needs Brought on by the Pandemic

7 days ago

IMF Blog
 Español, Français, Português
The human toll and global economic disruption from the COVID-19 pandemic triggered unprecedented demand for financing. More than 1/3 of the IMF’s membership have received relief from the Fund. Since the onset of the pandemic, the IMF has responded rapidly and decisively to meet urgent and exceptional demand for financial assistance from its membership.
Since March 2020, 70 members, including many low-income countries, have received financial support under the two instruments created to address urgent financing needs that may arise from natural disasters (including pandemics, earthquakes, hurricanes): the Rapid Credit Facility and the Rapid Financing Instrument. That support totaled over $29 billion. In April, the IMF also approved a broad package

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Together Again: Physical Distancing on the Decline

11 days ago

Era Dabla-Norris, Frederico Lima, and Hibah Khan
Earlier this year, stringent lockdowns and uncertainty about the severity and transmission of COVID-19 led to the widespread adoption of physical distancing measures across the world. However, as COVID-19 outbreaks began to ebb and lockdowns eased over the summer, measures tracking mobility, such as Google Community Mobility Reports, showed that adherence to keeping our distance from others began to relax. Our ongoing research finds that these increases in mobility were indeed matched by a significant decline in self-reported compliance for a range of recommended COVID-19 behaviors across many advanced and emerging economies.

Many people were seeking to balance the behaviors recommended to slow the spread of the virus with the need to

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Chart of the WeekData Disruption: The Impact of COVID-19 on Inflation Measurement

13 days ago

By Marshall Reinsdorf
Lockdowns, working from home, and physical distancing caused people to spend larger shares of their household budgets on food and housing, while fewer people bought nonessentials, like airline tickets and clothing. And with incomes down as millions have lost their jobs, spending on nonessential items will likely remain depressed.
The consumer price index (CPI) does not reflect these abrupt changes in spending patterns because the CPI weights are not continuously updated. For example, the CPI could be pulled down by a decline in the prices of nonessentials that are no longer purchased.
A new IMF staff paper uses spending estimates derived from credit and debit card data to adjust the CPI weights to match spending patterns during the pandemic. The study finds that

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Bridging the Digital Divide to Scale Up the COVID-19 Recovery

18 days ago

By Patrick Njoroge and Ceyla Pazarbasioglu
عربي, 中文, Español, Français, 日本語, Português, Русский 
Digitalization has in the past few years enabled developing countries in particular to leapfrog on financial inclusion. Countries like Kenya, Ghana, Rwanda and Tanzania have made great advances in connecting their citizens to financial systems by leveraging on mobile phone technology.

Digitalization must be driven by the needs of the people and work for them.

As the world has grappled with the COVID-19 pandemic, with closing of borders, curfews, lockdowns and other movement restrictions, digitalization has come to the rescue. Online shopping and entertainment, digital financial services, virtual meetings and events have taken center stage in lives and livelihoods globally.
Digital solutions

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Chart of the WeekThe Crisis is Not Over, Keep Spending (Wisely)

21 days ago

By Oya Celasun, Lone Christiansen, and Margaux MacDonald
The pandemic-induced economic crisis is set to leave deep scars. Human capital erosion from prolonged high unemployment and school closures, value destruction from bankruptcies, and constraints on future fiscal policy from elevated public debt top the list. Groups that were already poor and vulnerable are set to see the largest setbacks.
Swift and unprecedented action by policymakers, including among the Group of Twenty (G20) advanced and emerging market economies, helped avert an even worse economic crisis in the wake of COVID-19 than what has been witnessed. The G20 has provided around US$11 trillion in necessary support to individuals, businesses, and the healthcare sector since the start of the pandemic.
However, much of the

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How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies

25 days ago

By Gabriela Cugat and Futoshi Narita
Emerging markets and developing economies grew consistently in the two decades before the COVID-19 pandemic hit, allowing for much-needed gains in poverty reduction and life expectancy. The crisis now puts much of that progress at risk while further widening the gap between rich and poor.
Despite the pre-pandemic gains in poverty reduction and lifespans, many of these countries have struggled to reduce income inequality. At the same time, they saw persistently high shares of inactive youth (i.e., those not in employment, education, or training), wide inequality in education, and large gaps remaining in economic opportunities for women. COVID-19 is expected to make inequality even worse than past crises since measures to contain the pandemic have had

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Chart of the WeekFirms’ Environmental Performance in Times of Crisis

28 days ago

By Pierre Guérin, Fabio Natalucci, Felix Suntheim
عربي, 中文, Español, Français, 日本語, Português, Русский 
Leaders are often called upon to “rise to the challenge” in times of crisis. As firms and their leaders rise as best they can amid the ongoing health and economic crises, yet another crisis lies on the horizon. A looming environmental crisis, obscured by the exigency of the pandemic, requires action be taken by firms (and others). So how will business leaders and companies respond?
Our latest analysis looks at past episodes of financial and economic stress to gauge the likely impact of the current crisis on firms’ environmental performance.
On the one hand, the COVID-19 pandemic could increase awareness of environmental risks and bring about a shift in consumer preferences, corporate

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Emerging and Frontier Markets: Policy Tools in Times of Financial Stress

October 23, 2020

By Dimitris Drakopoulos, Rohit Goel, Fabio Natalucci, and Evan Papageorgiou
عربي, 中文, Español, Français
After the unprecedented hit to economic activity in emerging market economies from the COVID-19 pandemic, their economic output is projected to shrink by 3.3 percent in 2020. Central banks across emerging markets responded swiftly and forcefully with an unprecedented response of their own. They did this by using a variety of policy tools and, to a great extent, helped stabilize markets and keep them functioning.

Asset purchases may be suitable for some central banks, depending on the market conditions they face.

Nearly all central banks cut rates, most of them intervened in currency markets, and about half of them cut reserve requirements for banks, which provided liquidity to the

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Pandemic Persistence Clouds Latin America and Caribbean Recovery

October 22, 2020

By Samuel Pienknagura, Jorge Roldós, and Alejandro Werner
Español, Français
COVID-19 has hit Latin America and the Caribbean harder than other parts of the world, both in human and economic terms. The relatively large human toll is evident: with only 8.2 percent of the world population, the region had 28 percent of cases and 34 percent of deaths, by end-September.
Our new Regional Economic Outlook: Western Hemisphere projects a real GDP contraction of 8.1 percent in 2020. Unlike in previous recessions, employment contracted more strongly than GDP in the second quarter of 2020, 20 percent on average for the five largest countries, and up to 40 percent in Peru.

More people working in activities that require close physical proximity, and less teleworking have contributed to Latin America

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Sub-Saharan Africa’s Difficult Road to Recovery

October 22, 2020

By Abebe Aemro Selassie
Français, Português
The COVID-19 pandemic represents an unprecedented health and economic crisis for sub-Saharan Africa. Within months, the spread of the virus has jeopardized years of development and decades-long gains against poverty in the region while threatening the lives and livelihoods of millions of people.

Policymakers in sub-Saharan Africa now face the added challenge of rekindling their economies with fewer resources and more difficult choices.

In our latest Regional Economic Outlook, we project -3 percent growth in sub-Saharan Africa’s GDP in 2020, representing the worst outcome on record for the region. The drop will be even larger for economies dependent on tourism and commodity exports. Growth in the region should rebound modestly in 2021 to 3.1

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Engines Not Yet in Sync: A Multispeed Recovery in Asia

October 21, 2020

By Jonathan D. Ostry
中文, 日本語
The Asia-Pacific region is recovering from its worst recession in living memory. Our latest Regional Economic Outlook shows that a recovery started in the third quarter, but growth engines are not all firing with the same power across countries, leading to a multispeed recovery.

To enable structural change, Asia’s economic policies should be focused on the world of tomorrow, not yesterday.

Reflecting worse-than-expected outturns in the second quarter in a few countries, the IMF’s forecast for the region has been downgraded to -2.2 percent in 2020—the worst outcome for this region in living memory. India’s economy experienced a much sharper than expected contraction in the second quarter—24 percent on a year-over-year basis—and is expected to recover slowly in

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Europe Needs to Maintain Strong Policy Support to Sustain the Recovery

October 21, 2020

By Alfred Kammer
 Español, Français, Português
The pandemic is exacting a heavy toll on Europe. More than 240,000 people have lost their lives. Millions have suffered the illness themselves, the loss of loved ones, or major disruption in their work, their businesses, and their daily lives.
The economic impact of the pandemic has been enormous. Our latest Regional Economic Outlook for Europe forecasts a 7 percent decline in Europe’s GDP in 2020. The recovery from this crisis will be uneven and partial. While real GDP is projected to rebound by 4.7 percent in 2021, it would still be lower by 6.3 percent for 2021 relative to our pre-pandemic projections, implying a GDP loss of almost 3 trillion euros. Much of this loss will not be recouped over the medium term.

The economic impact of the

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A Leap Forward on Cross-Border Payments

October 19, 2020

By Tobias Adrian and Kristalina Georgieva
عربي, Español, Français, 日本語, Português, Русский 
When paying for coffee, we swipe, tap, wave, and soon may wink—a quick and painless exchange of coffee for money. But when paying for imports or sending remittances, we often fill-out forms, wait for days, and pay—too much.
Progress to improve cross-border payments has been slow, but is just about to take off. That is how history evolves—one small step at a time, until it suddenly leaps forward. The confluence of new technologies and renewed determination among policymakers are making significant improvements possible. Meanwhile, households and firms have come to expect (and demand) better services.

Reforms have the potential to be transformative by making cross-border payments cheaper, faster,

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Building an Inclusive Recovery in the Middle East and Central Asia

October 19, 2020

By Jihad Azour and Joyce Wong
 عربي, Français, Русский 
Countries in the Middle East and Central Asia face with COVID-19 a public health emergency unlike any seen in our lifetime, along with an unprecedented economic downturn. The pandemic is exacerbating existing economic and social challenges, calling for urgent action to mitigate the threat of long-term damage to incomes and growth.
As analyzed in our new Regional Economic Outlook, while the region responded resolutely and swiftly to save lives and stepped in with unprecedented policies to cushion the negative economic impact of containment policies, challenges abound.

While these challenges are stark and the period ahead highly uncertain, we see a path forward.

Think of the precipitous declines in oil demand and prices, which

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Fiscal Policy for an Unprecedented Crisis

October 14, 2020

By Vitor Gaspar, Paulo Medas, John Ralyea, and Elif Ture
عربي, 中文, Español, Français, 日本語, Português, Русский 
The COVID-19 crisis has devastated people’s lives, jobs, and businesses. Governments have taken forceful measures to cushion the blow, totaling a staggering $12 trillion globally. These lifelines have saved lives and livelihoods. But they are costly and, together with sharp falls in tax revenues owing to the recession, they have pushed global public debt to an all-time high of close to 100 percent of GDP.
With many workers still unemployed, small businesses struggling, and 80‑90 million people likely to fall into extreme poverty in 2020 as a result of the pandemic—even after additional social assistance—it is too early for governments to remove the exceptional support. Yet many

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A Bridge to Economic Recovery: Be Aware of Financial Stability Risks

October 13, 2020

By Tobias Adrian
عربي, 中文, Español, Français, 日本語, Português, Русский 
Despite a global economic crisis comparable only to the Great Depression, near-term financial stability risks have been contained with the help of unprecedented monetary policy easing and massive fiscal support across the globe. But many economies had pre-existing vulnerabilities—which are now intensifying, representing potential headwinds to the recovery.
Extraordinary policy measures have stabilized markets, boosted investors’ sentiment, and maintained the flow of credit to the global economy. Critically, these measures helped prevent a slowing economy and sliding financial markets from feeding on each other in a destructive vicious cycle.
The rebound in asset prices and the easing in global financial conditions

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A Long, Uneven and Uncertain Ascent

October 13, 2020

By Gita Gopinath
عربي, 中文, Español, Français, 日本語, Português, Русский 
The COVID-19 pandemic continues to spread with over 1 million lives tragically lost so far. Living with the novel coronavirus has been a challenge like no other, but the world is adapting. As a result of eased lockdowns and the rapid deployment of policy support at an unprecedented scale by central banks and governments around the world, the global economy is coming back from the depths of its collapse in the first half of this year. Employment has partially rebounded after having plummeted during the peak of the crisis.
This crisis is however far from over. Employment remains well below pre-pandemic levels and the labor market has become more polarized with low-income workers, youth, and women being harder hit. The

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COVID’s Impact in Real Time: Finding Balance Amid the Crisis

October 8, 2020

By Francesco Grigoli and Damiano Sandri
عربي, 中文, Español, Français, 日本語, Português, Русский 
One enduring lesson from the COVID-19 pandemic is that any lasting economic recovery will depend on resolving the health crisis.
Our research in the latest World Economic Outlook shows that government lockdowns—while succeeding in their intended goal of lowering infections—contributed considerably to the recession and had disproportional effects on vulnerable groups, such as women and young people. But the recession was also largely driven by people voluntarily refraining from social interactions as they feared contracting the virus. Therefore, lifting lockdowns is unlikely to lead to a decisive and sustained economic boost if infections are still elevated, as voluntary social distancing will

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Finding the Right Policy Mix to Safeguard our Climate

October 7, 2020

By IMF Staff
عربي, 中文, Español, Français, 日本語, Português, Русский 
Unaddressed, climate change will entail a potentially catastrophic human and economic toll, but it’s not too late to change course.
Global temperatures have increased by about 1°C since the pre-industrial era because of heat-trapping green-house gases accumulating in the atmosphere. Unless strong action is taken to curb emissions of these gases, global temperatures could increase by an additional 2–5°C by the end of this century. Keeping temperatures to levels deemed safe by scientists requires bringing net carbon emissions to zero on net globally by mid-century.

…economic policy tools can pave a road toward net zero emissions by 2050 even as the world seeks to recover from the COVID-19 crisis.

In the latest World

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Public Investment for the Recovery

October 5, 2020

By Vitor Gaspar, Paolo Mauro, Catherine Pattillo, and Raphael Espinoza
عربي, Español, Français, 日本語, Português, Русский  
Governments around the world are taking extraordinary measures to respond to the COVID-19 crisis. While maintaining the focus on addressing the health emergency and providing lifelines for households and businesses, governments need to prepare economies for the transition to the post-COVID-19 world—including by helping people get back to work.
Public investment has a central role to play. Our new Fiscal Monitor shows that increasing public investment in advanced and emerging market economies could help revive economic activity from the sharpest and deepest global economic collapse in contemporary history. It could also create millions of jobs directly in the short term

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Reform of the International Debt Architecture is Urgently Needed

October 1, 2020

By Kristalina Georgieva, Ceyla Pazarbasioglu, and Rhoda Weeks-Brown
Español
The COVID-19 pandemic has pushed debt levels to new heights. Compared to end-2019, average 2021 debt ratios are projected to rise by 20 percent of GDP in advanced economies, 10 percent of GDP in emerging market economies, and about 7 percent in low-income-countries. These increases come on top of debt levels that were already historically high. While many advanced economies still have the capacity to borrow, emerging markets and low-income countries face much tighter limits on their ability to carry additional debt.

Indeed, about half of low-income countries and several emerging market economies were already in or at high risk of a debt crisis, and the further rise in debt is alarming. Just as they are starting to

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Monetary Policy for all? Inequality and the Conduct of Monetary Policy

September 30, 2020

By Niels-Jakob Hansen, Alessandro Lin, and Rui C. Mano
Inequality in both advanced economies and emerging markets has been on the rise in recent decades. The COVID-19 pandemic has exacerbated and raised awareness of disparities between the rich and poor.
Fiscal policies and structural reforms are long known to be powerful mitigators of inequality. But what role can the central bank play?
In new IMF staff research, we find a case for central bankers to take inequality specifically into account when conducting monetary policy.
A new view on monetary policy
Even though inequality remains outside central banks’ mandates, major central bankers are increasingly discussing distributional issues. At the same time, recent advances in economic theory shed new light on the interplay of monetary

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CHART OF THE WEEKMission Impossible? Can Fragile States Increase Tax Revenues?

September 25, 2020

By Bernardin Akitoby, Jiro Honda, and Keyra Primus
The COVID-19 shocks are proving to be especially challenging for fragile states. Pre-COVID, fiscal revenues were low in such countries and governments were struggling to raise them. Now, COVID-19 is hitting them hard and fiscal revenues are falling. Once the pandemic abates, restoring and further enhancing tax collection is even more important to secure debt sustainability, facilitate the post-COVID-19 recovery, and meet development financing needs in order to meet the Sustainable Development Goals. This is a formidable challenge. However, our new staff research finds that achieving sizable gains in tax collection in fragile environments is not “mission impossible.”
As our chart shows, four fragile states (Liberia, Malawi, Nepal, and

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How to Meet the European Union’s Ambitious Climate Mitigation Goals

September 24, 2020

By Dora Iakova, Alfred Kammer, and James Roaf
عربي, 中文, Español, Français, 日本語, Português, Русский 
Last week, the President of the European Commission Ursula von der Leyen made an ambitious proposal. By 2030, the European Union would aim to reduce greenhouse gas emissions by at least 55 percent below their 1990 levels. And this is just an intermediate target. The final goal is for the EU to become climate neutral by 2050, as stated in the European Green Deal.
These goals are appropriately ambitious, while also realistic and achievable. Climate change mitigation is not a luxury but a necessity if we want to avoid a climate crisis. To limit global warming to 1.5°C above pre-industrial levels—a level considered relatively safe by climate experts—the whole world would need to become climate

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Digital Solutions for Small Businesses in the Middle East and North Africa

September 22, 2020

By Inutu Lukonga
عربي, Français
Small and medium-sized enterprises dominate the business landscape in the Middle East and North Africa region. These enterprises account for more than 90 percent of the region’s businesses and, in some countries, contribute as much as 50 percent of employment and 70 percent of GDP.
Yet they face impediments to growth, and their contribution to employment is below potential. In much of the region, small and medium-sized enterprises are handicapped by limited access to credit, unfavorable business environments, and talent gaps.
Digital technologies present new opportunities for these businesses to achieve faster growth. Emerging technologies and broadband internet can facilitate operational efficiencies, innovation, access to markets and finance, and can

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IMF Lending During the Pandemic and Beyond

September 17, 2020

By Robert Gregory, Huidan Lin, and Martin Mühleisen
Português
In the face of unprecedented uncertainty and the severe economic impact triggered by COVID-19, the Fund continues to adapt its lending. At the same time, it aims to ensure realistic targets, uphold the credibility of programs, and foster national ownership.
To date, the Fund has provided financial assistance, mainly through emergency lending and precautionary lending tools, to about 80 countries.
In addition, more than 30 countries have expressed an interest in Fund-supported programs to rebuild financial safety nets, and deal with the immediate aftermath of the pandemic.
To help members cope with this once-in-a-century pandemic, IMF lending programs are adapting—through innovation and increased flexibility—as countries move

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Charting a Path for a Resilient Recovery in Sub Saharan Africa

September 15, 2020

By Kristalina Georgieva and Abebe Aemro Selassie
Perhaps first among the many lessons of 2020 is that the notion of so‑called black swan events is not some remote worry. These purportedly once‑in‑a‑generation events are occurring with increasing frequency.
Take climate‑related shocks, especially in sub‑Saharan Africa. More than any other region, it is vulnerable to these events because of its heavy dependence on rain‑fed agriculture and its limited ability to adapt to shocks. Every year, the livelihoods of millions are threatened by climate‑induced disasters.
As we all continue to grapple with the COVID‑19 crisis, policymakers also need to look ahead. Countries need to ensure that the vast global fiscal support deployed to fight the pandemic also works to build a smarter, greener and more

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Chart of the WeekTrade as a Tool for an Efficient Recovery

September 14, 2020

By Jesus Gonzalez-Garcia and Yuanchen Yang
As economies now look for paths to recovery from the COVID-19 crisis, new evidence reaffirms that policies for more open and trade-integrated economies could significantly benefit domestic competition and ultimately may help lower costs for consumers in emerging and developing economies.
A recent Working Paper, building on the Regional Economic Outlook chapter on competition, competitiveness and growth in Sub-Saharan Africa, examines the effect of trade liberalization using a large firm-level dataset covering about 400,000 firms in 83 emerging and developing economies from 2000 to 2017. The study also focuses on 29 nations in sub-Saharan Africa where greater trade integration led to significantly lower markups. Markups show the ability of firms

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