(AGENPARL) – mer 12 aprile 2023 The Spring Meetings bring together central bankers, finance ministers and global thought-leaders from 190 member nations []
Dear Colleague, welcome to the April 12 briefing of the
2023 Spring Meetings
In the second of our daily briefings from the Spring Meetings, we focus on the global economy’s rocky recovery, financial stability risks and how to manage them, capital flows and emerging markets, climate finance and energy security, and more.
[weo press briefing]
Global inflation will fall, though more slowly than initially anticipated, from 8.7 percent last year to 7 percent this year and 4.9 percent in 2024, he added.
This year’s slowdown is concentrated in advanced economies, especially the euro area and United Kingdom. By contrast, growth in many emerging market and developing economies is picking up.
“More than ever, policymakers need a steady hand and clear communication,” Gourinchas said.
With financial instability contained, monetary policy should remain focused on bringing down inflation. Any expectation that central banks will prematurely surrender the inflation fight would support activity beyond what is warranted and complicate monetary authorities’ task, he added.
“Regulators and supervisors should also act now to ensure remaining financial fragilities don’t morph into a full-blown crisis by strengthening oversight and actively managing market strains.”
WORLD ECONOMIC OUTLOOK
Instability underlines fragile outlook
At a press conference, Pierre-Olivier Gourinchas said recent economic instability underscored the fragility of the outlook and the financial sector had become too complacent about maturity and liquidity mismatches. The Fund’s chief economist said brief instability in the United Kingdom’s Gilt market and banking turbulence in the United States illustrated significant vulnerabilities and warned that the financial sector could be tested again. A sharp tightening of global financial conditions—sometimes called a risk-off event—would have a dramatic impact, in emerging market and developing economies especially. In such a severe downside scenario, global growth could fall to about 1 percent this year, Gourinchas said.
[GFSR]
Risks to bank and nonbank financial intermediaries have increased as interest rates have been rapidly raised to contain inflation. Historically, such forceful rate increases by central banks are often followed by stresses that expose fault lines in the financial system.
“Faced with heightened risks to financial stability, policymakers must act resolutely to maintain trust. Gaps in surveillance, supervision, and regulation should be addressed at once. Resolution regimes and deposit insurance programs should be strengthened in many countries,” Adrian said.
“If financial sector distress was to have severe repercussions affecting the broader economy, policymakers may need to adjust the stance of monetary policy to support financial stability. If so, they should clearly communicate their continued resolve to bring inflation back to target as soon as possible once financial stress lessens.”
GLOBAL FINANCIAL STABILITY REPORT
Policymakers have tools to manage stability risks
At a press conference, Tobias Adrian told reporters that interest rate rises can trigger banking sector vulnerabilities, but policymakers have the tools to contain these risks. Indeed, central banks have some instruments for fighting inflation and others for ensuring financial sector stability. Ideally, stability concerns are addressed through targeted tools, while monetary policy continues to address inflation.
[climate finance energy security]
Energy expert Daniel Yergin outlined the complexities of the energy transition and stressed the importance of ensuring energy security because “it’s very difficult to have any transition” without it. Tim Gould of the International Energy Agency explained the importance of the role of climate financing in transitioning to clean energy, which typically has lower operational but higher upfront costs.
Rwanda’s Kampeta Sayinzoga and Egypt’s Rania Al-Mashat brought their country perspectives to the discussion, including the major difficulties they face in securing financing and the need for international collaboration among international financial institutions, the public sector and private sector.
Sayinzoga of the Rwanda Development Bank made the case for ensuring support to countries that are ready to implement clean energy solutions and using them as an example of what can be achieved when the political will is matched by the right financing.
[kampeta qotd]
[Capital flows]
Two decades of data show that global factors account for as much as 60 percent of the variability in spreads, with the US monetary stance having the biggest effect, he said. Historically, emerging market bond spreads surge and the volume of capital flows drops a few months after a tightening of US monetary policy.
“Movements in the US monetary policy stance are a powerful force behind global supply factors that drive capital flows to emerging economies.”
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[Philippines governor]
Felipe Medalla said that the Philippines and other emerging economies faced pressure on their currencies when the United States raised interest rates and they had to accept that the international financial system was driven largely by US domestic concerns. “We wish that the US was more caring about international conditions when they change policy rates.”
Memories of the Asian financial crisis still influence attitudes towards risk in Asia’s banking sector today and this partly explained prudent management, he added. “Our banks are run by people who have very long memories of 1997—they hate mismatches.”
CHART OF THE DAY
This year’s economic slowdown is concentrated in advanced economies, especially the euro area and the United Kingdom, where growth is expected to fall to 0.8 percent and -0.3 percent respectively. By contrast, many emerging market and developing economies are picking up, with year-end to year-end growth accelerating to 4.5 percent from 2.8 percent in 2022.
[whale analytical corner]
Protecting whales by reducing ship strikes is an economically sound and nature-based solution to climate change but requires international cooperation.
Escalante and Komaromi combined big data and computing technologies to estimate whale mortality for every ship and voyage and recommended policies to conserve the giant marine mammals.
These include reducing speed of the ocean vessels in whale-rich waters, introducing dynamic pricing for ocean usage, and setting up a fund to compensate shipping companies for the cost of speed limits or altering shipping routes.
NUMBER OF THE DAY
A single great whale is worth $2 million based on the value of its carbon sequestering services and economic benefits, IMF economists told an Analytical Corner on big data and nature conservation.
million
TODAY’S HIGHLIGHTS
WEDNESDAY, APRIL 12
8:00 AM – 8:45 AM ET
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10:30 AM – 11:30 AM ET
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11:30 AM – 12:30 PM ET
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12:00 PM – 1:00 PM ET
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1:00 PM – 1:30 PM ET
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2:00 PM – 2:30 PM ET
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2:30 PM – 3:15 PM ET
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3:15 PM – 3:45 PM ET
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4:00 PM – 4:45 PM
IMF TODAY
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