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IMF-Staff Discussion Note-The Return to Fiscal Rules
October 11,2022--Summary:
Summary:
Governments face difficult policy trade-offs with record debt levels,tightening monetary policies,and urgent demands,including food and energy crises,the climate agenda,and population aging. Governments need to communicate fiscal plans to reduce debt sustainability risks and promote consistent macroeconomic policies.
Many envisage a return to fiscal rules that had been suspended during the pandemic to strengthen credibility. This situation offers an opportunity to rethink fiscal rules and determine how governments can make fiscal policy more agile,including in responding to crises,without undermining fiscal sustainability.
A risk-based medium-term fiscal framework that combines standards,rules,and strengthened institutions would strike a better balance between flexibility and credibility.
IMF-Global Financial Stability Report, October 2022: Navigating the High-Inflation Environment
October 11, 2022--Summary:
Global financial stability risks have increased amid a series of cascading shocks. Chapter 1 analyzes the policy response of central banks to high inflation,the risks of a disorderly tightening of financial conditions,and debt distress among emerging and frontier markets. Markets have been extremely volatile,and a deterioration in market liquidity appears to have amplified price moves. In Europe,the energy crisis is contributing to a worsening outlook.
In China,the property sector remains a key source of vulnerability. Chapter 2 examines how to narrow the climate financing gap in emerging market and developing economies. Climate policies,including carbon pricing,climate disclosures,and transition taxonomies,are crucial for enabling private climate finance. Innovative financial instruments can help to scale up private climate finance,but the public sector-ncluding multilateral development banks-will have to play a key supporting role. Chapter 3 analyzes the contributions of open-end investment funds to fragilities in asset markets. Open-end investment funds play a key role in financial markets,but those offering daily redemptions while holding illiquid assets can amplify the effects of adverse shocks by raising the likelihood of investor runs and asset fire sales. This contributes to volatility in asset markets and potentially threatens financial stability.
IMF-World Economic Outlook Report October 2022-Countering the Cost-of-Living Crisis
October 11, 2022--Inflation and uncertainty
Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia's invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.
This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.
Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.
ETFs, asset managers at risk from sudden sales over coronavirus: IMF official
October 11, 2022--Any sudden decision by investors to sell shares in credit-focused asset managers and exchange traded funds (ETFs) over concerns about the coronavirus outbreak could put pressure on the managers to sell their riskier assets quickly, the director of IMF Monetary and Capital Markets said on Wednesday.
Investors have been growing increasingly worried that the spread of coronavirus could hit U.S. corporate cash flow if the expanding health crisis keeps workers at home or prevents companies from paying employees.
Demand for ESG investments outstrips supply, PwC finds
October 11, 2022--Cost of compliance could be one factor holding back development of new products, studies suggest
Demand for sustainable investments is outstripping supply, new research suggests, in contrast to reports of a growing backlash against investing according to environmental, social and governance (ESG) principles.
A new study by PwC found that nearly nine in 10 institutional investors believe that asset managers should be more proactive in developing new ESG products. However, fewer than half of asset managers (45 per cent) were planning to launch new ESG funds.
Bond markets are slumping. It sends a key message about global debt levels
October 10, 2022-- Global bond funds faced a total outflow of $175.5 billion in January-September -the highest level in 2 decades.
This is because high debt levels and rising interest rates have reduced investors' confidence in the ability of governments to pay back debt.
Governments and companies have borrowed heavily in the past few years to take advantage of ultra-low interest rates, but now face higher interest payments.
Global bond funds saw the biggest outflows in two decades in the first three quarters of this year as hefty interest rate increases by central banks to tame inflation sparked fears of a recession.
According to Refinitiv Lipper, global bond funds faced a cumulative outflow of $175.5 billion in the first nine months of this year, the first net sales in that period since 2002.
Market jitters spur September flight to Treasury ETFs
October 7, 2022--Government bonds including Treasuries accounted for 60 per cent of inflows, up from 20 per cent in August
Global investors pumped more than $35bn into exchange traded funds in September, but the bulk went to US Treasury funds as investors battened down the hatches and sought the safest of safe havens.
A total of $22.1bn - more than double the total for all government bonds in August -was squirrelled away into Treasuries in September, according to data from BlackRock. The lower total of $21.9bn in inflows for all government bonds indicate that Treasuries were the star of September's show.
Rethinking How We Measure Companies on Social and Environmental Impact
October 6, 2022--A new framework offers a broader, more effective approach to assessing both the internal and external aspects of a company's social and sustainability performance.
The COVID-19 pandemic, the war in Ukraine, and the ongoing climate crisis have put a spotlight on the central role businesses can play in tackling global challenges.
We need companies to step up and help solve social and environmental problems at scale- for the sake of the economy as well as people and the planet .
One of the incentives companies have for being more socially and environmentally active-shareholder influence- is limited by existing approaches for assessing a company's social and environmental performance. The predominant frameworks are too narrow and fail to fully address key stakeholder concerns on their own. Environmental, social, and governance (ESG) assessments focus on internal operational matters, such as labor relations and supply chain sustainability, but don't fully consider the impact that a company's products or services can have on outside stakeholders.
WTO-Trade growth to slow sharply in 2023 as global economy faces strong headwinds
October 5, 2022--World trade is expected to lose momentum in the second half of 2022 and remain subdued in 2023 as multiple shocks weigh on the global economy. WTO economists now predict global merchandise trade volumes will grow by 3.5% in 2022-slightly better than the 3.0% forecast in April. For 2023, however, they foresee a 1.0% increase-down sharply from the previous estimate of 3.4%.
Import demand is expected to soften as growth slows in major economies for different reasons. In Europe, high energy prices stemming from the Russia-Ukraine war will squeeze household spending and raise manufacturing costs. In the United States, monetary policy tightening will hit interest-sensitive spending in areas such as housing, motor vehicles and fixed investment. China continues to grapple with COVID-19 outbreaks and production disruptions paired with weak external demand. Finally, growing import bills for fuels, food and fertilizers could lead to food insecurity and debt distress in developing countries.
Further Delaying Climate Policies Will Hurt Economic Growth
October 5, 2022--The transition to a greener future has a price-but the longer countries wait to make the shift, the larger the costs.
The world must cut greenhouse gas emissions by at least a quarter before the end of this decade to achieve carbon neutrality by 2050.
Progress needed toward such a major shift will inevitably impose short-term economic costs, though these are dwarfed by the innumerable long-term benefits of slowing climate change.
In our latest World Economic Outlook, we estimate the near-term impact of different climate mitigation policies on output and inflation. If the right measures are implemented immediately and phased in over the next eight years, the costs will be small. However, if the transition to renewables is delayed, the costs will be much greater.
To assess the short-term impact of transitioning to renewables, we developed a model that splits countries into four regions-China, the euro area, the United States, and a block representing the rest of the world.