Latin America

(Photo: Oleg Shuldiakov/iStock by Getty Images)

Latin America Loses Momentum

Economies in Latin American and the Caribbean are losing momentum after making a strong comeback last year, say the IMF’s new director for the region, Ilan Goldfajn, and co-authors Anna Ivanova and Jorge Roldos in a new blog.

This year growth in the region is expected to slow to 2.4 percent, a downgrade from the October forecast of 3 percent, and much slower than the estimated expansion of 6.8 percent in 2021.

–Recovery Risks: Uncertainty about the evolution of the pandemic continues to cast a shadow on the recovery globally and in Latin America and the Caribbean. So too do inflationary pressures in the United States and across the region, which may call for an even faster withdrawal of monetary accommodation, and a potential change in investor risk sentiment and associated tighter global and domestic financial conditions.

–Monetary Tightening: Policymakers could prepare for US monetary policy tightening by extending public debt maturities, reducing fiscal rollover needs more generally, and limiting the buildup of currency mismatches on financial sector balance sheets where possible, the authors say.

If rising inflation threatens to de-anchor inflation expectations, central banks will have to raise interest rates further to signal a continued commitment to inflation targets and to avoid persistent price increases.

Financial Stability

(Photo: Jeff Moore/IMF Photos)

Financial Stability Spotlight

The Financial Sector Assessment Program is a key pillar of IMF surveillance. It undertakes a deep-dive into potential systemic risks to financial stability, including by conducting “stress tests” to gauge the ability of financial institutions to withstand adverse shocks to the economy.

In a new blog, the IMF explains how FSAPs evaluate the strength of supervisory and regulatory frameworks to mitigate risks, and the adequacy of crisis management tools and safety nets to handle threats that may materialize.

–Systemically Important: This year’s assessments address seven economies with systemically important financial sectors: Germany, United Kingdom, Mexico, Russia, Turkey and Ireland, which are reviewed every five years, and South Africa, which is assessed once every 10 years. The others, which requested the assessments themselves, are Colombia, Uruguay and the West Africa Economic and Monetary Union.

F&D

(Image: iStock/Mcdomx)

Mapping the Unknown

Almost a thousand years ago, in 1085, William the Conqueror commissioned a survey of his kingdom of England, acquired 19 years earlier. The goal: inventory all the assets and understand what revenue they should generate, and hence what was due to the Crown in rent or taxes. This work was called the Domesday Book.

In an article for the forthcoming issue of Finance & Development, Ian Ball, John Crompton and Dag Detter write that today’s governments have largely forgotten the importance of an accurate inventory of assets. This problem, rooted in government accounting systems, impedes valuation and efficient asset management. A quick, low-cost solution is to find the hidden assets by doing an asset map and to manage them through a public wealth fund.

For too long, many countries have ignored asset valuation and management, and the resulting impact of this neglect. The need to address both COVID-19 and climate change, which will strain public finances for at least a generation, demands radical action. Given that the alternative in many countries could be prolonged austerity, rethinking how governments view public assets is now a moral as much as an economic goal.

Read the entire article.

Check out our December Issue of Finance & Development. And look out for the March issue, on Rethinking Fiscal.

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Quote of the Week

“State fragility and conflict are clearly among the most enduring challenge of our times.”

—The IMF’s Franck Bousquet talking in a podcast about fragile and conflict-affected states.

WEEKLY ROUND-UP

01. Georgieva Talks to Washington Post

IMF Managing Director Kristalina Georgieva joined Washington Post columnist David Ignatius on Wednesday to discuss the Fund’s latest World Economic Outlook and how the organization is using its firepower to support its membership. Watch a video of the wide-ranging discussion that also took in the situation in Ukraine and the economic impact of possible sanctions.

02. Special Drawing Rights

One of the most significant measures by the IMF in response to the global pandemic was the historic allocation of Special Drawing Rights equivalent to $650 billion. Ceyla Pazarbasioglu, Director of the Strategy, Policy, and Review Department, appeared alongside central bankers and government ministers on Wednesday to explore ways to exploit the power of these SDRs at a panel discussion hosted by the Center for Global Development.

03. Gender-based Violence

The IMF’s Ratna Sahay and Rasmané Ouedraogo joined speakers from UN Women and the Government of Rwanda on Thursday to highlight how the pandemic and associated lockdowns have led to a rise in gender-based violence in sub-Saharan Africa. Beyond the moral imperative, the speakers underlined the importance of combating violence against women from an economic standpoint. Watch here.

04. Supply Shocks

The auto sector is macro-critical in many European countries. A recent IMF staff paper assesses the impact of global pandemic-induced labor supply shocks—both directly and via supply chains—during the initial phase of COVID-19 on the auto sector and aggregate activity in Europe.

05. Capacity Development

A new IMF staff paper proposes reforms to widen the reach of capacity development information, including technical assistance and training, at a time when members, partners and other providers expect greater transparency and access to information.

06. IMF Online Courses

The IMF’s online curriculum keeps expanding with 52 courses currently open for enrollment, including the Government Finance Statistics course now also available in French and Spanish. Find the right course for you and follow it at your own pace. The courses are available to all, and for free. You can find the full course offering here.

MARK YOUR CALENDAR

01. Digital Currencies

IMF Managing Director Kristalina Georgieva will join Tobias Adrian, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department, and other speakers on Feb. 9 at 09:00 a.m. ET at the virtual launch of a new Fintech Note covering central bank digital currencies. Watch the event, hosted by the Atlantic Council, here.

02. Inclusive Growth

Rising inequality and widespread poverty, social unrest and polarization, gender and ethnic disparities, declining social mobility, economic fragility, unbalanced growth due to technology and globalization, and existential danger from climate change are urgent global concerns. The Center for Global Development will host a virtual event on Feb. 10 at 12:00 p.m. ET to launch the new book, How to Achieve Inclusive Growth, co-published by the IMF and Oxford University Press, which addresses these intertwined issues. The editors will present key findings and a high-level panel from the IMF, CGD, the Government of Colombia, Oxfam America, and academia will provide their perspectives and policy experience.