Weekend Read Special Edition: Annual Meetings 2023

In this special edition from the Annual Meetings, we spotlight the Managing Director’s call for world leaders to unlock economic opportunities for the next generation, the complex challenges facing the global economy from geopolitics to technology, how voluntary channeling of the IMF’s unique international reserve asset is benefitting countries, and regional economic outlooks for Asia, Europe, Africa, and the Americas.

Visit our recap page to catch up on all the happenings from Marrakech over the past five days.

FULL SCHEDULE

Economic Reform And Cooperation Can Unlock Opportunities For Next Generation

It’s 50 years since the IMF held its annual meetings in Marrakech in 1973. After looking back at the past half-century of extraordinary progress and periodic upheaval, Kristalina Georgieva on Friday asked the governors of the Fund to imagine what the world would look like in 2073.

Drawing on visions from artificial intelligence, and mindful of the challenges facing the global economy, the managing director proposed two priorities for policymakers. First, investment in strong economic foundations—notably bringing down inflation, financial stability, and transformational reforms.

“The right package of reforms could boost output levels by up to 8 percent in four years,” she said.

Second, policymakers should invest in international cooperation—particularly in areas such as debt, climate, and the global financial safety net, with a strengthened IMF at its center.

While the Fund has responded to recent shocks in an agile and unprecedented way, the IMF needs to be urgently strengthened, she noted, pointing to the need to boost permanent quota resources, and replenish the subsidies that enable the Poverty Reduction and Growth Trust to provide zero-interest loans.

Georgieva ended with a call to action to assembled policymakers: “Together, we will unlock the door to opportunities for the next generation.”

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Global Economy Faces Complex Challenges, From Geopolitics To Technology

Global leaders face a bumpy road ahead, characterized by weak medium-term growth prospects, persistent inflation, geopolitical tensions, mounting debt, and higher interest rates, IMF First Deputy Managing Director Gita Gopinath told a seminar on the global economy.

With countries borrowing at much higher interest rates, they will need to find alternative ways to finance their development goals and manage the green transition.

“We’re seeing a looming mismatch between the spending needs and the resources to pay for them,” Gopinath said, adding that countries must turn to domestic resource mobilization and seek to bolster their tax revenues.

With interest rates higher for longer, the focus must return to fiscal and debt sustainability, noted JP Morgan’s chair of global research, Joyce Chang.

“The bond vigilantes are back and the Great Moderation is over.”

In this complex global environment, countries should avoid protectionism and fragmentation, according to WTO director general Ngozi Okonjo-Iweala. The organization’s research shows that trade fragmentation could result in long-term losses of up to 5 percent of global GDP, with significantly higher losses for emerging markets.

The issue does not lie with trade itself, but rather with the overconcentration of some supply chains, she said. Developing economies, excluded from the first wave of globalization, now have the right business environment to warrant their inclusion in supply chains.

“We can build resilience while being inclusive—we are calling it ‘re-globalization’.”

Panelists agreed that the current environment is increasingly challenging and being transformed by technological advances such as artificial intelligence—and this requires a fundamental rethink of economics.

“The instruments that we have been using need to change, evolve, and adjust,” said Christine Lagarde , president of the European Central Bank. “That applies also to our communication and many factors that have an impact on our job as central bankers.”

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Asia’s Economic Momentum is Slowing, but Region Remains a Global Growth Driver

Strong consumer spending has supported economic growth in Asia this year, but there are already signs that the region’s recovery may be losing some steam.

The IMF lowered the growth estimate to 4.2 percent, from the 4.4 percent projected in April, according to the latest Regional Economic Outlook for Asia and the Pacific, released on Friday. The region is likely to expand 4.6 percent this year, unchanged from the projection from last April.

While Asia is still poised to contribute about two-thirds of all global economic growth this year, Asia-Pacific Department Director Krishna Srinivasan noted in a blog that growth is significantly lower than what was projected before the pandemic and output has been hurt by a series of global shocks.

“The region is facing challenges from persistent medium-term output losses and China’s structural slowdown, geoeconomic fragmentation, and inflation,” Srinivasan told reporters at a press briefing.

Despite the challenging global environment, Asia remains a relatively bright spot, Srinivasan said. Beyond China, where the property crisis is worsening, he noted that surveys of purchasing managers have been pointing to continued resilience in activity across Asia’s services sector.

IMF TODAY

European Central Bank President Christine Lagarde joins the debate on the global economy. IMF department heads Abe Selassie (Africa) and Jihad Azour (Middle East and Central Asia) put the focus on youth and jobs in Africa and the Arab world.

Europe Must Restore Price Stability To Secure Lasting Economic Growth

Europe’s policymakers must remain focused on defeating inflation, restoring fiscal stability and raising productivity to set the stage for stronger growth over the longer term.

IMF European Department Director Alfred Kammer told reporters at a press briefing that central banks should maintain a restrictive monetary policy stance for as long as necessary to secure price stability.

“Experience from past inflation episodes cautions against easing too early,” Kammer said.

The IMF forecasts growth of 0.7 percent for 2023 in advanced Europe, down from 3.6 percent in the post-pandemic rebound of 2022. European emerging market economies (excluding Belarus, Russia, Türkiye, and Ukraine) are expected to expand by 1.1 percent this year.

Thereafter, the outlook should improve gradually, with growth in 2024 rising to 1.2 percent in advanced and 2.9 percent in emerging market economies, according to IMF projections.

Europe should move forward with structural reforms to secure stronger and greener growth over the longer term, Kammer said, citing the continent’s weak productivity growth as a core problem.

“Reforms should focus on removing barriers that stand in the way of economic innovation and dynamism.”

Africa’s Economies Will Rebound Despite Debt and Inflation Challenges

Growth in sub-Saharan Africa will slow to 3.3 percent this year but is expected to rebound to 4 percent in 2024, Abebe Aemro Selassie, the director of the IMF’s African Department told a press briefing at the launch of the department’s latest Regional Economic Outlook.

Growth is expected to be broad-based, he said, indicating that outcomes are encouraging given strong external headwinds. Significant challenges remain, including double-digit inflation in a third of the region’s countries.

Selassie stressed four policy priorities going forward: addressing inflation, reducing debt vulnerabilities, allowing exchange rates to depreciate where needed, and continued investment in priority areas like health, education and infrastructure.

Governments in many countries have been working hard to address macroeconomic imbalances, he said, highlighting enormous potential in the region.

“Our region is home to a fast-growing and highly creative population. We must invest in them now to allow them to reach their full potential and make this 21st century the African Century.”

Latin America Can Strengthen Shock Resilience With Fiscal Policy

Growth in Latin America and the Caribbean will slow from 4.1 percent in 2022 to 2.3 percent this year and remain around this rate in 2024, Rodrigo Valdes, director of the IMF’s Western Hemisphere Department, said at the launch of the department’s latest Regional Economic Outlook.

The slowdown reflects tighter policies to contain inflation and a weakening global environment, tighter external financing conditions, and lower commodity prices.

Inflation is likely to converge gradually toward central bank targets, but Valdes told a press briefing that the balance of risks remains tilted to the downside. Risks include slower growth in the region’s main trading partners, commodity price volatility, further inflationary shocks, renewed turbulence in global financial markets, and an intensification of geopolitical tensions.

Valdes said that fiscal policy should focus on rebuilding policy space to ensure fiscal sustainability and boost resilience against future shocks.

Putting public finances on a stronger footing but at the same time protecting social spending would require additional revenue mobilization in the region, he said.

“Fiscal efforts will require significant discipline going forward.”

CHART OF THE DAY

The Chart of the Day shows how voluntary channeling of special drawing rights, the IMF’s unique international reserve assets, benefits countries through two key lending instruments: the Poverty Reduction and Growth Trust and the Resilience and Sustainability Trust. These trusts allow us to support our vulnerable and low-income members confronting multiple and varied challenges.

Check out all the daily recaps of the week here

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