Geopolitical fragmentation could cut global GDP by 2 percent: IMF

WASHINGTON - Growing geopolitical fragmentation around the world, including the US-China trade war and the Russian invasion of Ukraine, could cut global output by two percent over the long run, the International Monetary Fund said.

Research by the IMF found that growing geopolitical tensions were causing a reallocation of foreign direct investment (FDI) away from countries that were geographically close and towards those that were geopolitically close, like the United States and Europe.

This reallocation of FDI has the potential to cause serious damage to emerging market economies, the IMF said, since they are more reliant on inflows of investment from more geopolitically distant countries.

"In general, a fragmented world is likely to be a poorer one," IMF officials wrote in a blog post published Wednesday to accompany the research.

Policymakers "should carefully balance the strategic motivations behind reshoring and friend-shoring against economic costs to their own economies and the spillovers to others," the IMF officials wrote, adding that it was "crucial" to try and foster greater global integration.

The IMF also published research on Wednesday outlining the impact to the banking sector of geopolitical fragmentation, highlighting the cost to Russia and its allies of the 2022 invasion of Ukraine.

"Cross-border banking and portfolio debt flows to Russia and its allies (countries that rejected the motion in the United Nations in March 2022 to condemn Russia’s war on Ukraine) have reversed sharply, with allocations falling by about 20 and 60 percent relative to prewar levels, respectively," IMF officials wrote in a blog post.

The report found that rising tensions between investing and recipient countries like the United States and China had reduced the overall bilateral cross-border allocation of portfolio investment and bank claims by around 15 percent.

Agence France-Presse

IMF upgrades global growth outlook again as some COVID clouds begin to clear

The International Monetary Fund raised its outlook for global economic growth again on Tuesday, forecasting worldwide output would rise 6 percent this year, a rate unseen since the 1970s, thanks largely to the unprecedented policy responses to the COVID-19 pandemic.

That upgrade, from 5.5 percent less than three months ago, largely reflects a rapidly brightening outlook for the US economy, which the IMF now sees growing by 6.4 percent in 2021, the fastest since the early 1980s. That's up 1.3 percentage points from the IMF's 5.1 percent projection in late January and nearly double the rate it estimated in October.

The IMF forecast, if realized, would mark the fastest pace of global growth since 1976 but also comes off the steepest annual downturn of the post-war era last year as the pandemic brought commerce around the world to a near stand-still at times. The fund said the world economy contracted 3.3 percent in 2020, a modest upgrade from an estimated contraction of 3.5 percent in its January update.

The latest World Economic Outlook - released at the start of the IMF's and World Bank's spring meetings - reflects a dramatic divergence between the outlook for the United States and much of the rest of the world courtesy of another $1.9 trillion in pandemic relief spending recently enacted in Washington.

The outlooks for other advanced economy heavyweights, such as Germany, France and Japan, hardly improved at all since January. Nonetheless, with the heft of the US outlook improvement as the main driver, the IMF marked up its advanced economy growth estimate to 5.1 percent from 4.3 percent.

Forecasts for emerging market economies, while somewhat improved, took a back seat to their developed peers. The fund's outlook for EM economies rose by just 0.4 percentage point - half of the advanced economy mark-up - to 6.7 percent from the view in January.

"(M)ultispeed recoveries are under way in all regions and across income groups, linked to stark differences in the pace of vaccine rollout, the extent of economic policy support, and structural factors such as reliance on tourism," the IMF said in its report summary.

The United States economy this year will join China in regaining a level of gross domestic product that exceeds where it stood before the pandemic struck just over a year ago, the IMF said. China recaptured all of its lost growth by the end of 2020.

The IMF emphasized the high degree of uncertainty surrounding the outlook, and that improvements could easily be tripped up by any of several factors, with success against the pandemic topping the list.

"Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade," it said.

Another big risk centers around the persistence of accommodative policies, from the United States in particular. Long-term interest rates around the world have risen sharply since January, as market participants revise their expectations for how soon the US Federal Reserve begins to normalize its policy stance. 

(Reporting By Dan Burns; Editing by Andrea Ricci)

Agence France-Presse

IMF to test working from home in case virus strikes

WASHINGTON — All International Monetary Fund employees will work from home on Friday, the fund said Monday, to test systems in case the spreading coronavirus epidemic makes working remotely a necessity.

The World Bank, too, has been testing remote work procedures on a smaller scale, a spokesman told AFP.

Last week, the IMF and World Bank announced that their Spring meetings in April would become a virtual event amid the spread of COVID-19 which has sickened 110,564 people in 100 countries and killed 3,862.

As more governments and companies are encouraging work from home to contain the virus, the IMF said in a statement it would for the first time conduct a "fund-wide remote work exercise," as part of its "crisis preparedness efforts and in preparation for the virtual spring meetings in April."

"This exercise will allow us to further strengthen the fund's readiness to continue its operations and serve its membership during these trying times," a spokesperson said.

The World Bank is meanwhile testing remote work "department by department," and already has a "number of systems in place" to ensure staff can work remotely, a spokesman said, speaking from his home kitchen.

The development lending institutions hold meetings twice per-year, attracting thousands of officials, journalists and private sector participants from 180 member countries -- just the kind of gathering health authorities say should be avoided amid the outbreak.

The outbreak has caused the cancellation or postponement of a number of events, including the ASEAN summit US President Donald Trump was scheduled to host later this month.

Finance ministers and central bank governors from 189 IMF and World Bank member countries attend the Spring and annual meetings, in April and October, which also include a host of side gatherings, panels, conferences and related events all around in Washington. The official participant count is about 10,000.

The World Bank spokesman said those side events will be skipped this year. Only the institutions' 2 steering committees will meet, the International Monetary and Financial Committee and the Development Committee, which involve only about 2-dozen officials.

The flagship event ahead of the meetings is the release of the IMF's World Economic Outlook, which will be in the spotlight given the warnings that global growth will slow notably due to the broadening epidemic.

Agence France-Presse 

IMF chief Georgieva tells women: Don't accept less!

WASHINGTON - Women around the world take on far more unpaid work than men but what they should never do is agree to a lower wage in the workplace, IMF chief Kristalina Georgieva said Tuesday.

She recounted her experience early in her career during the Soviet era, saying she did not know at the time she could bargain for better conditions.

To women of today she said: "Do not accept to be less paid than your colleague men, ever!"

The International Monetary Fund released a report on Tuesday which found that unpaid work "is a substantial part of economic activity that goes unmeasured and is shouldered disproportionally by women."

In fact, women do 2 hours more of unpaid work than men every day and even "in the most egalitarian countries in the world, women do at least 20 percent more unpaid work than men," notably chores around the home, the report said.

To address that issue, governments must invest in infrastructure, to provide water and electricity and internet access, but also provide services such as childcare and elder care, and improve education opportunities, to help women "replace unpaid work with paid work."

In more advanced economies, that means "implementing family-friendly policies such as parental leave and taxation of secondary earners, enhancing the efficiency of labor markets, and promoting flexible work arrangements."

But asked by one young woman how to achieve professional success, Georgieva offered no easy solutions:

"You have to be competent and to be more confident."

She also said quotas for hiring women in private firms were not a perfect solution "but it's pragmatic" since it could provide a faster path to gender equity in the workplace. Otherwise it will take a "very, very long time."

source: news.abs-cbn.com

Zimbabwe inflation soars to nearly 300%: IMF

Zimbabwe's annual inflation rate soared to nearly 300 percent in August spurred mainly by a collapsing currency, the International Monetary Fund (IMF) said Thursday after a mission to the crisis-weary country.

In a statement, the IMF said year-on-year inflation "reached almost 300 percent in August".

The local currency has fallen from parity against the American dollar to 16.5 Zimbabwean dollars (ZWL) per US dollar following currency reforms introduced in February in a bid to solve a chronic monetary crisis.

In June, inflation had stood at 176 percent.

The latest estimates are stoking fears of a return of the kind of hyperinflation that wiped out savings 10 years ago when the economy collapsed and prices of goods and services skyrocketed every week.

Early last month Finance Minister Mthuli Ncube said the government would stop publishing inflation figures until February next year to allow the statistics agency to collect fresh data using the new currency since prices were no longer pegged in US dollars.

The US dollar had been the national currency since 2009 when the country trashed its own currency following hyperinflation of as much as 500 billion percent.

But in June, Zimbabwe ended the use of US dollars and other foreign currencies and replaced them by two local parallel currencies -- "bond notes" and electronic RTGS dollars.

After its two-week mission, the IMF team concluded that the southern African country remains in "economic difficulties" which have been "exacerbated by severe weather shocks".

"GDP growth in 2019 is expected to be steeply negative, as the effects of drought on agricultural production and electricity generation, impact of cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth," it said in a statement.

It said that social conditions had "deteriorated sharply", with more than half of the country's population unlikely to be able to feed itself adequately between now and the next harvest season in the first half of 2020.

"Weakening confidence, policy uncertainty, a continuation of FX market distortions, and a recent expansionary monetary stance" had increased pressure on the exchange rate, it said. 

President Emmerson Mnangagwa, on taking over from Robert Mugabe, promised to revive the economy and declared Zimbabwe "open for business".

But nearly two years later, the economy is floundering and many Zimbabweans say they are worse off than they were under Mugabe.

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IMF/World Bank: 75 years as the world's financial firefighters

WASHINGTON -- At the critical moment of a Hollywood movie starring A-lister Sandra Bullock, Bolivia's newly elected president calls in the International Monetary Fund (IMF) to bail out the poverty-stricken country, violating a campaign promise. 

The streets erupt in violent protest.

The movie, "Our Brand is Crisis," is a fictionalized version of the 2002 Bolivian elections and it drastically simplified the situation. But the writers knew the IMF would be unquestionably accepted as the arch enemy of the people.

After 75 years putting out financial fires around the world, the IMF and World Bank face criticism for repeatedly failing to prevent crises and for making things worse for the people they were meant to help.

That makes them easy scapegoats.

Even if the criticism is not always entirely fair -- no one blames the doctor for prescribing a painful but life-saving treatment -- the institutions have been trying to rebrand themselves in recent years, putting more emphasis publicly on protecting vulnerable members of society in their lending programs.

But they will need more than a better communications strategy as they contend with a wave of anti-globalization sentiment and technological transformation -- while also helping Africa through a transition requiring massive investment in infrastructure and job creation just to keep up with population growth.

The challenges "are huge," World Bank president David Malpass told AFP in an interview.

The IMF and World Bank were created July 22, 1944 in the shadow of World War II to help rebuild Europe and later Japan, and to try to head off the kind of economic strife that had led to the war.

"The original concept of reconstruction and development ... was clarified to include poverty alleviation as the bank grew," Malpass said.

Dismal record

On the surface, their record, especially for the IMF, seems dismal, with each of the prior three decades marked by a severe crisis: the Latin American debt crisis in the 1980s, the Asian and Russian crises in the 1990s and the global financial crisis in 2007, which begat the Great Recession that still looms over the world economy today.

In each case, the damage lasted for a decade or more and the IMF was blamed for inflicting even more pain with its rigid demands and policy advice that, according to the fund's harshest critics, too often favored corporate interests in the rich countries over the poor nations in trouble.

But at the same time extreme poverty has plummeted worldwide -- falling by a billion people since 1990.

"In the history of the world there has never been so much progress in improving people's lives as we have seen in the last 75 years," said Masood Ahmed, who worked alternately either at the IMF or World Bank for nearly half their existences.

But the institutions missed the problems growing beneath the surface. 

The world "was doing so well on the macro level, and there were so many people being lifted out of poverty, that we glossed over the fact that there were many people who were increasingly uncomfortable with the pace of change," said Ahmed, who leads the Center for Global Development, an anti-poverty research organization.

"And I think we're paying a bit of a price for that now."

Without prompting, Malpass volunteered criticism of the "Washington consensus" -- sneering shorthand for policies imposed on developing nations that centered on privatization and steep cuts in government spending and employment.

The consensus was this policy menu would work for every country in crisis -- advice that flies in the face of economic theory calling for spending to increase during a downturn.

Instead, Malpass said he wants to focus the World Bank's programs on what is best for each country.

"I want it to be more and more effective at helping countries find a path to growth and to good outcomes for the people of those countries."

Greater representation

Agustin Carstens, former head of the Mexican central bank and once a deputy managing director of the IMF, credits the organizations with providing needed oversight and policy advice that has prevented "many more crises."

The problem is that, when the IMF is called in, "it goes into an economy at the most difficult time," when all other sources of financing have closed and there are no good options.

But he worries the institutions have failed to adapt to the changing global economy, giving only lip service to the far greater weight of countries like China and India.

With IMF managing director Christine Lagarde set to leave her post on September 12 to take over the European Central Bank, the old powers are poised to continue the tradition of naming a European to lead the fund while an American runs the World Bank, despite past pledges to change.

Carstens, who was a finalist to take over the IMF leadership in 2011 when Lagarde was selected, said the reform is urgently needed to "give more legitimacy to the advice that the fund provides."

source: news.abs-cbn.com

IMF's Lagarde 'honored' to be tapped to head European Central Bank

WASHINGTON -- International Monetary Fund chief Christine Lagarde on Tuesday announced she would step down "temporarily" from the global crisis lender after being nominated to lead the European Central Bank.

EU leaders announced a deal to fill the top positions in the political and economic bloc, including picking Lagarde to succeed ECB chief Mario Draghi, whose single, eight-year term ends in November.

"I am honored to have been nominated for the Presidency of the European Central Bank," Lagarde said in a statement, adding that she would "temporarily relinquish my responsibilities as Managing Director of the IMF during the nomination period."

The nomination means Lagarde will step down two years before the end of her second five-year term at the helm of the IMF, which will open a search for her replacement.

The fund's executive board met Tuesday and named American economist David Lipton, Lagarde's chief deputy, as interim leader of the institution.

"We accept Ms Lagarde's decision to relinquish her IMF responsibilities temporarily during the nomination period," the board said in a statement. 

"We have full confidence in First Deputy Managing Director David Lipton as Acting Managing Director of the IMF."

By tradition, since the institutions were created in the wake of World War II, a European has always led the IMF and an American has been at the helm of the World Bank, although emerging market nations in recent years have pressed for more representation.

When Lagarde was selected in 2011, it was the first time the fund had an open leadership search process, in which any board member or country representative could nominate a candidate. Lagarde was selected over Agustin Carstens, then the head of the Mexican central bank.

She has drawn praise for her role leading the IMF in the wake of the global financial crisis.

"She's been a tremendous ambassador for the fund, a great salesperson, a very good communicator," said Mark Sobel, a former US Treasury official and chairman of the Official Monetary and Financial Institutions Forum.

He told AFP that Lagarde has experience in monetary policy even if she has never led a central bank and, like US Federal Reserve Chairman Jerome Powell, is not an economist.

"She's been involved in all the monetary debate and it's not like they don't discuss monetary policy at the fund."

Her second term in office coincided with the rise of US President Donald Trump and a wave of confrontations among major economies over trade, which the former French finance minister described as the major threat to the world economy.

Lagarde has at the same time acknowledged the strains caused by globalization, which has disrupted industries and marginalized some workers.

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IMF studying Argentina request for early help as peso crashes

BUENOS AIRES -- The International Monetary Fund said it was studying a request from Argentina to speed up disbursement of a $50 billion loan program after a collapse in investor confidence in President Mauricio Macri's government sent the peso tumbling more than 7 percent on Wednesday.

It was the biggest one-day decline in the peso since the currency was allowed to float in December 2015. It closed at a record low of 34.10 per US dollar and is down more than 45.3 percent against the greenback this year, prompting massive central bank interventions.

Nerves are frayed in Latin America's No. 3 economy as it struggles to break free from its notorious cycle of once-a-decade financial crises. The last one, which was punctuated by a 2002 debt default, tossed millions of middle-class Argentines into poverty.

The run on the peso prompted Argentina to turn to the IMF for the $50 billion credit line earlier this year. As part of the deal, Argentina's government pledged to speed up plans to reduce the fiscal deficit.

But given the peso's continued depreciation, which makes the country's dollar-denominated debts more expensive to pay, investors are increasingly concerned that the IMF help may not be enough.

"We have agreed with the International Monetary Fund to advance all the necessary funds to guarantee compliance with the financial program next year," Macri said in a televised address on Wednesday. "This decision aims to eliminate any uncertainty."

"Over the last week we have seen new expressions of lack of confidence in the markets, specifically over our financing capacity in 2019," Macri said.

IMF Managing Director Christine Lagarde responded by saying in a statement that the multi-lateral lender's staff would "reexamine the phasing of the financial program." She said that the "more adverse international market conditions" had not been "fully anticipated" when the IMF and Argentina reached the deal in June.

"Authorities will be working to revise the government's economic plan with a focus on better insulating Argentina from the recent shifts in global financial markets, including through stronger monetary and fiscal policies," Lagarde said.

Argentina has $24.9 billion in peso- and foreign currency-denominated debt payments due next year, according to official data.

Speaking to reporters after the IMF statement was issued, Treasury Minister Nicolas Dujovne said the government would reduce the size of its financing program, but did not provide specifics

UNION TO PROTEST BELT-TIGHTENING

If Macri was trying to calm investors, it did not work.

"The market is saying: 'Just the fact that you are engaging in this conversation makes me very, very nervous,'" Daniel Osorio, president of New York-based consultancy Andean Capital Advisors, said in a telephone interview.

The peso's decline has contributed to a jump in inflation, which hit a 12-month rate of 31.2 percent in July. In response, the central bank has hiked interest rates to 45 percent and sold more than $13 billion in reserves, including $300 million in an auction on Wednesday.

All that, combined with the budget cuts promised to the IMF that will slow down public works projects, is contributing to a recession that will result in an economic contraction of 1 percent this year, according to the government. That could hurt Macri's re-election prospects in next year's presidential race.

The June signing of the IMF deal reduced the need for costly bond market funding and briefly steadied the peso. The government has since announced more than $2 billion in budget savings, a process Macri promised to continue.

"We will accompany the IMF support with all necessary fiscal efforts," said Macri, who was elected in 2015 on a free market platform after eight years of deep government intervention in the economy under previous President Cristina Fernandez.

Argentina's biggest labor group, the CGT, said on Wednesday it will call a 24-hour general strike on Sept. 25 to protest Macri's belt-tightening measures. Two smaller union groupings said they will go on a 36-hour strike on Sept. 24 to protest the IMF, which many blame for the 2002 crisis.

"I know that these tumultuous situations generate anxiety among many of you," Macri said. "I understand this, and I want you to know I am making all decisions necessary to protect you." 

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IMF warns United States against protectionist trade policies

WASHINGTON -- The International Monetary Fund warned on Thursday that US President Donald Trump's new import tariffs threaten to undermine the global trading system, prompt retaliatory responses from other countries and damage the US economy.

The IMF, in a review of US economic policy, also said that while the country's economic growth was expected to be strong this year and next, recent tax and spending measures could cause greater risks from 2020 onwards.

Trump has riled key allies by pursuing protectionist trade policies, including the imposition of steel and aluminum tariffs on the European Union, Canada and Mexico.

"These measures...are likely to move the globe further away from an open, fair and rules-based trade system, with adverse effects for both the US economy and for trading partners," the IMF said in its report.

Trump stunned his counterparts by backing out of a joint communique agreed by Group of 7 leaders in Canada last weekend that mentioned the importance of free, fair and mutually beneficial trade.

German Chancellor Angela Merkel has said the EU would implement counter-measures against US tariffs, as did Canada and Mexico.

The IMF said a cycle of retaliation on trade would likely dampen national and international investment, interrupt global and regional supply chains and undermine a system that has supported US growth and job creation.

"The US and its trading partners should work...to reduce trade barriers and resolve trade and investment disagreements without resorting to tariff and non-tariff barriers," the IMF said.

It added that targeting specific levels on bilateral trade balances was counterproductive.

The Trump administration's trade dispute with China has also yet to be resolved. The United States is expected on Friday to unveil revisions to an initial tariff list targeting $50 billion of Chinese goods.

China urged Washington on Thursday to make a "wise decision" on trade, saying it was ready to respond in case Washington chose confrontation.

Elsewhere in its analysis, the Washington-based international lender stuck to its April forecast that the US economy will grow at a 2.9 percent pace in 2018 and 2.7 percent in 2019.

The US economy is being juiced by the administration's $1.5 trillion package of corporate and income tax cuts as well has higher government spending.

In line with the US Federal Reserve, the IMF expects growth to slow considerably in 2020. It forecasts the annual pace of growth falling back to 1.9 percent.

It noted that the US government's tax and spending policies during a time when the economy is already experiencing strong growth and low unemployment "increases the range and size of future risks" including higher public debt and greater likelihood of recession.

"The output gap could close more abruptly, through a policy-induced recession, with negative spillovers for the global economy," the IMF said.

The IMF also expressed concern about the growing market power of some of the largest US "superstar" corporations and said that there was a "clear role" for applying antitrust policies or increased regulation.

It did not name any firms, but IMF officials in the past have cited concerns with the market concentration wielded by large technology firms such as Alphabet Inc's Google, Amazon.com Inc Apple Inc and Facebook.

The IMF said the United States needed to combat price discrimination, supply restrictions or predatory pricing that could arise from increased market concentration, and should fairly tax "supernormal" profits resulting from such power.

"It may also sometimes be appropriate for the entity providing the service to be regulated," the IMF said.

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US-China trade tension dominates IMF gathering

Trade tensions between the United States and China, which threaten to spill over into the global economy, are dominating a gathering of world finance officials even as the Group of 20 avoided the topic on Saturday.

Official after official has called for disputes to be resolved through dialogue rather than unilateral tariffs, and warned about the threat to the economic recovery.

French Economy Minister Bruno Le Maire criticized what he called a "vain and pointless" spat with China. 

"We run the risk of trade war. We run the risk of multilateral order breaking down that is good for no one, and most definitely not for the world economy and growth," Le Maire told reporters during the spring meetings of the International Monetary Fund.

But US President Donald Trump's top finance official said the fault lies with countries that employ unfair trade policies.

"We strongly believe that unfair global trade practices impede stronger US and global growth, acting as a persistent drag on the global economy," US Treasury Secretary Steven Mnuchin said in a statement to the IMF.

While IMF chief Christine Lagarde has offered the fund as a forum to resolve differences, Mnuchin instead said the IMF "should be a strong voice" in urging members "to dismantle trade and non-tariff barriers and to protect intellectual property rights."

Le Maire agreed China must respect the rules, but said the country is a key part of the world trading system.

"We must redefine international trade with China, not against China."

- Serious consequences -

Theft of American intellectual property and technology has been a key irritant in the dispute with Beijing, which prompted President Donald Trump to announce steep tariffs on tens of billions of dollars' worth of Chinese goods, on top of last month's punitive duties on steel that were primarily targeted at China as well.

Washington and Beijing have traded tariff threats and also filed complaints against each other at the World Trade Organization.

WTO Director Roberto Azevedo warned that the effects of a major escalation "could be serious," and poor countries would be the collateral damage.

"A breakdown in trade relations among major players could derail the recovery that we have seen in recent years, threatening the ongoing economic expansion and putting many jobs at risk," he said in a statement to the meetings.

The IMF has highlighted the trade tensions as a major downside risk to the otherwise solid global recovery, and Lagarde said the dispute undermines confidence and creates uncertainty that could choke off investment which has been a prime engine of the global recovery.

The WTO projects global merchandise trade will expand by 4.4 percent this year, after increasing by 4.7 percent in 2017.

- G20 avoids trade issue -

Despite the intense focus on the US-China dispute, the Group of 20 finance ministers, from the world's major economies, avoided discussion of the issue Friday, even while acknowledging the potential danger it posed to the global economy.

"We didn't have a discussion on specific measures on trade," Argentine Treasury Minister Nicolas Dujovne told reporters after the meeting. "The G20 is not the place to discuss specific measures. That's the WTO."

It was a surprising omission for the group that was key to shepherding the global economy through the 2008 financial crisis and preventing another depression.

But Dujovne said, "We have to also recognize the limitations that we as a group have... and try to find a consensus even if the consensus is more limited than we want."

The ministers did express concern over the growth of "inward looking policies," he said, using a frequent euphemism for trade protectionism.

But German central bank chief Jens Weidmann said the G20 officials all agreed trade must benefit all countries.

"Protectionism, not to mention a trade war, is certainly not the solution."

Le Maire repeated his criticism of the US tariffs on steel and aluminum which were aimed at China but only spared the EU and other key trading partners under a temporary exemption that is due to expire May 1.

As close allies in the EU "we expect not only temporary exemption but a full and permanent exemption," he said.

"We cannot live with a kind of sword of Damocles hanging over our heads."

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IMF chief says growth strong but countries must prepare for change

JAKARTA - International Monetary Fund Managing Director Christine Lagarde said on Tuesday the global economy was showing broad-based growth, but the landscape was shifting with heightened risks of trade disputes, monetary policy normalization and technological change.

Lagarde, speaking to an IMF conference in Jakarta in preparation for the Fund's annual meetings in Bali in October, said the IMF was expecting global growth to reach 3.9 percent in 2018 and 2019. This is unchanged from the IMF's forecast in January and up from 3.7 percent in 2017.

She said ASEAN countries were preparing for higher interest rates in advanced economies such as the United States and Europe, but cautioned that policymakers needed to stay vigilant about its effect on financial stability and volatile capital flows.

"We know this will have spillover effects across the world. We have known for some time that it's coming," Lagarde said. "It remains uncertain how this transition is going to affect other countries, companies, jobs, incomes."

ASEAN countries need to embrace new growth models that put a greater emphasis on domestic demand, regional trade and economic diversification and prepare for technological changes such as increased factory automation, artificial intelligence, biotechnology, new financial technologies and digital currencies.

While these could eliminate some jobs, it was important for countries to boost efforts to educate workers to better prepare them to take advantage of new technologies.

"Many jobs will be affected one way or another. Some of them will disappear, but many more will be affected because of automation. So we need to think about the future of work," Lagarde said, adding that there was no single approach, and many countries would forge their own path.

She highlighted Go-Jek, the fast-growing motorcycle hailing and delivery service in Indonesia as an example of a country-specific technology innovation targeted to the country's needs and workforce.

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Global markets seeing 'necessary corrections': IMF chief

DUBAI - The latest volatility in global financial markets represents "necessary corrections," IMF chief Christine Lagarde said in Dubai on Sunday, in the wake of a Wall Street plunge.

"The market trepidations that we have seen in the last few days are not worrying me.

"Those market movements were clearly, in our view, necessary market corrections," she told an audience at Dubai's World Government Forum.

Wall Street stocks ended a bruising week on a benign note, courtesy of a late-session surge on Friday, while equity markets in Europe and Asia fell sharply in volatile trading.

"I would not focus on what has happened in the last few days. I would focus on the imperatives of change going forward and the need to fix the roof," Lagarde said.

On Saturday, she had urged Arab countries to slash public wages and subsidies in order to rein in spending, achieve sustainable growth and create jobs.

Speaking at the one-day Arab Fiscal Forum in Dubai, Lagarde welcomed "promising" reforms adopted by some Arab states, but insisted much more was needed to overcome daunting economic and social problems.

Low oil prices are weighing on the finances of Arab oil exporters, while importers are battling with rising debt, unemployment, conflicts, terrorism and refugee inflows, the IMF's managing director said.

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IMF chief: Make reforms while sun shines on world economy

PARIS - International Monetary Fund chief Christine Lagarde has urged France and other countries to push through reforms "while the sun is shining" on the global economy.

In an interview with France's Le Journal du Dimanche published Sunday Lagarde said the strength of the global economic recovery had taken the IMF by surprise.

"In 2017, for the first time in a long time, we revised our growth forecasts upwards whereas previously we used to lower them," she said.

Global growth of 3.6 percent was both "stronger and more widely shared" in 2017, she said, noting that developed economies were now growing again under their own steam and no longer merely being pulled along by demand in emerging markets.

Lagarde said the favorable climate lent itself to implementing reforms.

"When the sun is shining you should take advantage to fix the roof," she said, using one of her favourite maxims.

This year's global growth is on a par with the average of the 2 decades leading up to the global financial crisis of 2007-2008.

The IMF has forecast a further slight improvement in 2018, to 3.7 percent.

In Lagarde's native France, seen for years as one of Europe's weak links, the recovery kicked in in earnest this year.

From 1.1 percent in 2016, growth is expected to rise to 1.9 percent in 2017 -- still short of the 2.4 percent forecast for the eurozone as a whole but better than the 1.6 percent initially forecast in the eurozone's second-largest economy.

Centrist President Emmanuel Macron aims to consolidate the momentum and bring down stubbornly high unemployment with an ambitious program of labor, tax and welfare reforms.

Lagarde said the changes were key to boosting France's credibility at a time when Macron is pushing for reforms at the European level, including closer integration among eurozone members.

The managing director of the IMF was France's finance minister in 2008, when the euro looked to be in serious jeopardy.

Nearly 10 years later, the currency is out of the woods.

But, Lagarde warned, "the mission has not been accomplished -- and maybe never will -- because Europe is not united on moving towards greater integration while maintaining national sovereignty."

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Blast at IMF Paris offices after envelope opened, one person hurt

PARIS - A letter exploded when it was opened at the offices in central Paris of the International Monetary Fund (IMF) on Thursday injuring one person.

The Paris police department said an operation was ongoing at the offices of the IMF and World Bank after the incident.

The blast was caused by a homemade device, said the head of the French capital's police force.

"It was something that was fairly homemade," police chief Michel Cadot told reporters.

Cadot said there had been some telephone threats made in recent days, but it was not clear if these were linked to the incident at the IMF's offices.

IMF chief Christine Lagarde condemned an explosion as "a cowardly act of violence."

"I condemn this cowardly act of violence and reaffirm the IMF's resolve to continue our work in line with our mandate. We are working closely with the French authorities to investigate this incident and ensure the safety of our staff," she said.

The incident, just six weeks before a presidential election, comes as a militant Greek group Conspiracy of Fire Cells claimed responsibility for a parcel bomb mailed to German Finance Minister Wolfgang Schaeuble on Wednesday.

French President Francois Hollande said French authorities would do all they could to find those responsible for the incident.

(Reporting by Bate Felix, Sudip Kar-Gupta and Sophie Louet; Writing and Editing by Richard Balmforth, John Irish and Adrian Croft)

source: news.abs-cbn.com

IMF says global growth to stay weak, warns of populist fallout

WASHINGTON - The International Monetary Fund maintained its forecast for weak global growth on Tuesday and warned that further stagnation would fuel more populist sentiment against trade and immigration that would stifle activity, productivity and innovation.

In the latest update of its World Economic Outlook, the IMF said that a drop in US growth for 2016 due to a weak first-half performance would be offset by strengthening in Japan, Germany, Russia, India and some other emerging markets.

The Fund kept its overall global growth forecasts unchanged at 3.1 percent for 2016 and 3.4 percent for 2017 after cutting its outlook for five straight quarters.

"Taken as a whole, the world economy has moved sideways," IMF chief economist Maurice Obstfeld said in a statement.

"Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself."

The new forecasts were released as global policymakers gathered in Washington for the IMF and World Bank annual meetings this week.

The IMF said advanced economies as a whole would see a weakening of growth in 2016, down 0.2 percentage point from July to 1.6 percent, while emerging market and developing economies will see a 0.1 percentage point gain in growth to 4.2 percent.

The IMF said its 2017 forecast for both groups was unchanged, with advanced economies forecast to grow 1.8 percent and emerging markets growing 4.6 percent.

The United States accounts for much of the decline in advanced economies, with a reduction to 1.6 percent growth from 2.2 percent forecast in July, due to a disappointing first-half performance caused by weak business investment and a draw-down of goods inventories.

The drag from a stronger dollar and lower energy prices should fade by next year.

The Fund also argued for a gradual approach to Federal Reserve interest rate hikes "tied to clear signs that wages and prices are firming durably."

Its growth forecast for Japan improved slightly due to government spending, a delay in a consumption tax increase and expansionary monetary policy, but only to a weak 0.5 percent in 2016 and 0.6 percent in 2017.

For Britain, the IMF lifted its 2016 forecast by 0.1 percentage point as retail spending has held up better than expected after the June vote to leave the European Union.

But it lowered its 2017 forecast by 0.2 percentage points to 1.1 percent on anticipation that uncertainty over separation from Europe will take a bigger toll on investment in the country.

Growth forecasts for China remained unchanged at 6.6 percent for 2016 and 6.2 percent for 2017 as strong policy support and credit growth were fueling domestic consumption.

India's growth will improve slightly to 7.6 percent in both years, while Russia will benefit from a rebound in energy prices.

Obstfeld said that persistently weak growth that leaves lower-income people behind has fueled a political movement "that blames globalization for all woes" and seeks to raise trade barriers, adding that the vote for "Brexit" was one example of this.

"In short, growth has been too low for too long, and in many countries its benefits have reached too few -- with political repercussions that are likely to depress global growth further," Obstfeld said.

The IMF said other risks to the outlook included further turbulence from China's transition towards a more consumer-driven economy, another drop in commodity prices, a sharp hike in trade barriers and a flare-up in geopolitical tensions.

source: www.abs-cbnnews.com

China's yuan joins elite club of IMF reserve currencies

China's yuan joins the International Monetary Fund's basket of reserve currencies on Saturday in a milestone for the government's campaign for recognition as a global economic power.

The yuan joins the U.S. dollar, the euro, the yen and British pound in the IMF's special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. It marks the first time a new currency has been added since the euro was launched in 1999.

The IMF is adding the yuan, also known as the renminbi, or "people's money", on the same day that the Communist Party celebrates the founding of the People's Republic of China in 1949.

"The inclusion into the SDR is a milestone in the internationalisation of the renminbi, and is an affirmation of the success of China's economic development and results of the reform and opening up of the financial sector," the People's Bank of China said in a statement.

China will use this opportunity to further deepen economic reforms and open up the sector to promote global growth, the central bank added.

The IMF announced last year that it would add the yuan to the basket, so actual inclusion is not expected to impact financial markets. But it puts Beijing's often opaque economic and foreign exchange policy in the international spotlight as some central banks add yuan assets to their official reserves.

Critics argue that the move is largely symbolic and the yuan does not fully meet IMF reserve currency criteria of being freely usable, or widely used to settle trade or widely traded in financial markets. U.S. Republican presidential nominee Donald Trump has said he will formally label China a currency manipulator if he wins November's election.

China stunned investors by devaluing the currency last year and the yuan has since weakened to near six-year lows, adding to worries about already feeble global growth.

Some China watchers also fear that Beijing's commitment to further market opening and financial sector reforms will fade after its diplomatic success, despite repeated reassurances from Beijing it will continue with the process.

U.S. Treasury Secretary Jack Lew said on Thursday the yuan was "quite a ways" from true global reserve currency status. The new IMF status recognises the "enormous" change in China in the last 10 years that had made the yuan more open, but Beijing still had work to do to make its currency and its economy more market-driven, he said.

"Being part of the SDR basket at the IMF is quite a ways away from being a global reserve currency," he said.

Capital Economics said inclusion of the currency in the IMF's SDR basket will have minimal impact on foreign demand for yuan assets, so "offers little support" for the currency.

"If anything, the risk is that official intervention to keep the renminbi stable ahead of its inclusion will subsequently be paired back, allowing for renewed deprecation," it said in a research note.

The IMF on Friday fixed the relative amounts of the five currencies in the basket for five years, based on their average exchange rates over the past three months. (Reporting by Nathaniel Taplin; Additional reporting by Ben Blanchard; Editing by Neil Fullick)

source: www.abs-cbnnews.com

IMF's Lagarde denies any 'panic' of the market after Brexit

WASHINGTON - Financial markets have "grossly underestimated" the outcome of the British referendum on leaving the European Union but did not panic said the Executive Director of IMF international (IMF), Christine Lagarde, on Sunday.

At a forum in Aspen, Colorado, Christine Lagarde said that central bankers had their work Friday at the announcement of the victory of Brexit, and ensured that the broad masses of cash are available.

Political leaders have worked themselves for market participants that "the situation was under control. And it was under control," she said.

"There was a violent movement, brutal and immediate, the pound fell 10 percent," said Christine Lagarde.

"But there was no panic and central bankers have done the work for which they were ready in case, that is to say inject a lot of liquidity in the markets," she continued.

There was no liquidity problem Friday, unlike most severe moments of the 2008 financial crisis, she said.

The market reaction depends now, she continued, measures that take the British and European leaders to handle divorce and limit the uncertainty that results.

"To date, officials both in the UK and Europe take the uncertainty in their hands. The way they act in the coming days will really influence the direction that will take the risk," said the director General of the IMF.

Policy makers and international institutions must cooperate to manage the implications of the vote for the release of the EU the UK, she continued, noting that only Britain could formally initiate divorce proceedings, and Europe can not force his hand.

"We have strongly encouraged the effective continuation of the transition in the most efficient, most predictable, to reduce the level of uncertainty, which in turn will determine the level of risk," she said.

source: www.abs-cbnnews.com

Central bank says may increase holdings of Chinese yuan assets

The Philippine central bank on Wednesday said it may increase its holdings of Chinese yuan assets to diversify its sources of foreign exchange reserves after the International Monetary Fund (IMF) added the renminbi to its reserves basket.

Policymakers may also consider purchasing more yuan bonds, including those of longer tenors, as they become available, Bangko Sentral ng Pilipinas Governor Amando Tetangco told Reuters in a mobile phone message.

On Monday, the IMF admitted China's yuan, also called the renminbi, into its benchmark currency basket, in a victory for Beijing's campaign for recognition as a global economic power.

source: www.abs-cbnnews.com

IMF gives China's currency prized reserve asset status

WASHINGTON - The International Monetary Fund admitted China's yuan into its benchmark currency basket on Monday, in a victory for Beijing's campaign for recognition as a global economic power.

The decision to add the yuan, also known as the renminbi, to the Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, is an important milestone in China's integration into global finances and a nod to the progress it has made with reforms.

To meet the IMF's criteria, Beijing has undertaken a flurry of reforms in recent months, including better access for foreigners to Chinese currency markets, more frequent debt issuance and expanded yuan trading hours.

IMF chief Christine Lagarde, who along with in-house experts had previously given her support for the inclusion, made it clear she did not expect Beijing to stop there.

"The renminbi's inclusion in the SDR is a clear indication of the reforms that have been implemented and will continue to be implemented," she told reporters.

The People's Bank of China said the move, which was backed by countries including the United States, Britain and Japan, showed the international community expected China to play a bigger role in the world economy.

"Going forward, China will continue to deepen and accelerate economic reforms and financial opening up, and contribute to promoting world economic growth, safeguarding financial stability and improving global economic governance," it said in a statement.

The PBOC's vice governor Yi Gang said he expected the inclusion would make the yuan more stable and there was no basis for it to devalue further, as some traders had expected.

"LANDMARK RECOGNITION"

An IMF official said it was not IMF policy to disclose board voting records, but a person familiar with the IMF deliberations said approval had been unanimous.

The yuan will have a 10.92 percent share, in line with expectations, after a review of the weightings formula for the SDR that also cut the euro's share by more than 6 percentage points.

An editorial in China's official Xinhua news agency said the decision was a "landmark recognition" of China's increased role in the global economy.

"The Chinese yuan clearly deserves a place in that grouping. China is the world's second-biggest economy and top trader, and its currency is liquid and stable enough to serve as a store of value," it added.

To be included in the SDR basket, the yuan had to meet the criteria to be "freely usable", or widely used to make international payments and widely traded in foreign exchange markets, a yardstick it missed at the last review in 2010.

The yuan's inclusion from October 2016 is largely symbolic, with few immediate implications for financial markets. But it is the first time an additional currency has been added to the SDR basket, which determines which currencies countries can receive as part of IMF loans.

"Ultimately China would like to see, as a number of countries would, the dollar end its reign as the global reserve currency," said Malcolm Polley, chief investment officer at Stewart Capital Advisors.

"That won't happen until there is another currency that from a geopolitical standpoint is as secure as the dollar."

EURO MAKES ROOM

The new SDR formula gives more weight to financial variables and less to exports, reflecting long-standing criticism of the methodology but also cutting the euro's share to 30.93 percent, from 37.4 percent.

The yuan will come in with a higher weight than sterling and yen, which will drop to 8.09 percent and 8.33 percent respectively, while the dollar remains broadly unchanged at 41.73 percent.

The addition is likely to fuel demand for China's currency and for renminbi-denominated assets as central banks and foreign fund managers adjust their portfolios to reflect the yuan's new status.

Moody's Investors Service said it would give a confidence boost for investors in yuan assets and it expected more yuan-denominated bonds from non-Chinese issuers in China, and an increase in Beijing's quotas for cross-border investment channels.

But analysts said investors would nevertheless remain cautious as long as China did not fully liberalize capital controls or allow the currency to float freely.

"'Freely usable' meant freely usable to reserve managers and available to official institutions," said Steven Englander, head of G10 foreign exchange strategy at Citi in New York.

"But if you look at the normal definition of liquidity, the point is not that just you and your mates can use it but that the whole world can use it."

The IMF said China's comparatively higher interest rates would likely increase the SDR interest rate, potentially pushing up the cost of IMF loans for some borrowers. (Reporting by Krista Hughes; Additional reporting by Jason Lange and Howard Schneider in Washington and Dion Rabouin, Daniel Bases and Sam Forgione in New York; Editing by Alan Crosby and Will Waterman)

source: www.abs-cbnnews.com

IMF poised to put Chinese yuan in elite currency basket

WASHINGTON - The International Monetary Fund is expected to approve inclusion of China's yuan in its SDR basket of elite currencies on Monday, rewarding Beijing's strong pursuit of the global status.

The IMF executive board is scheduled to meet Monday to decide on the recommendation by staff experts earlier in November to include the yuan, also known as the renminbi, alongside the US dollar, euro, Japanese yen and British pound in the grouping.

While not a freely traded currency, the SDR (special drawing right) is important as an international reserve asset, and because the IMF issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.

China, now the world's second-largest economy, asked last year for the yuan to be added to the grouping of world reserve currencies, but until recently it was considered too tightly controlled to qualify.

It is extremely rare that the executive board, which represents the IMF's 188 member nations, opposes the recommendation of its own experts. IMF Managing Director Christine Lagarde said in mid-November that she supported the experts' finding that the yuan had met the requirements to be a 'freely usable' currency" -- a key hurdle for SDR status.

If accepted, the decision would not take effect before September 30, 2016, to allow users more time to prepare. The last time the SDR basket was modified was in 2000, when the euro replaced the German deutschemark and the French franc.

The remaining question is the yuan's weight in the basket. It could be 10 percent to 16 percent, but the lower estimate is more likely due to the Chinese currency's limited convertibility.

The basket composition is reviewed every five years. At the last rebalancing in 2010, the dollar accounted for 41.9 percent, the euro 37.4 percent, the pound 11.3 percent and the yen 9.4 percent.

That weighting revision was based on the value of the exports of goods and services by country or currency zone, and the amount of reserves denominated in the respective currencies held by other IMF members.

DIPLOMATIC SUCCESS

The entry of the yuan is, above all, a major diplomatic success for Beijing, which will see its money graduate to the inner circle of the world's most important currencies.

The vote of the United States, the largest IMF stakeholder, will be closely watched, as will US political reactions. US officials have long accused China of keeping the yuan artificially low to gain a trade advantage, making its exports relatively cheaper.

The US Treasury Department, in an October 19 report, said that the yuan "remains below its appropriate medium-term valuation."

Paradoxically, China's unexpected devaluation of the yuan last August received good marks from the IMF because it reinforced the currency's movements with market forces and opened the door to future revaluation.

Beijing on Wednesday announced an initial group of foreign central banks has been allowed to enter the Chinese currency market, which likely will promote further internationalization of the yuan in global trading.

Credit rating firm Fitch says it does not expect the yuan's inclusion in the IMF basket "to lead to a material shift in demand for renminbi assets globally in the short term." However, it said, over time the emergence of the yuan as a global reserve currency could support China's credit rating.

An IMF decision to include the yuan among its elite currencies risks angering some lawmakers in the US Congress amid fierce maneuvering for the 2016 presidential election.

Congress, for example, has repeatedly refused to ratify a 2010 IMF reform that would give greater weight to the emerging-market powers, the so-called BRICS - Brazil, Russia, India, China and South Africa.

source: www.abs-cbnnews.com