IMF meets with global economy in historic recession
WASHINGTON - The guardians of the global economy will gather this week under the cloud of the worst recession since the Great Depression, and a recovery dependent on scientists finding a coronavirus vaccine.
The International Monetary Fund and World Bank will hold their annual meetings, with both calling on the Group of 20 largest economies to extend a freeze in debt payments from the world's poorest nations that's set to expire at year end.
While the fund last month flagged a "small upward revision" to its 2020 growth forecast from its June outlook, it warned the rebound will be long and uneven.
The IMF has been encouraging governments to spend whatever they need to confront the crisis, even while warning that debt as a percentage of GDP will rise to about 100 percent for the first time.
Fund month officials earlier this proposed reforms to debt restructuring for countries that struggle to meet obligations, a burden likely to rise as the pandemic batters economies.
Debt vulnerabilities will be a key theme of the meetings, according to first deputy managing director Geoffrey Okamoto.
The G-20 agreed in April to waive billions of dollars in repayments by poorer nations until the end of the year under the Debt Service Suspension Initiative. The World Bank says this isn't enough and wants borrowings reduced to prevent a bigger fallout.
IMF power players
The IMF has also been working to figure out how to transfer existing reserve assets known as special drawing rights from rich countries that don’t need them to poorer nations that do.
A proposal to create $500 billion in SDRs was blocked in April by the US, the fund's biggest shareholder, which criticised the plan as inefficient.
Federal Reserve Board Vice Chair Richard Clarida and Randal Quarles are scheduled to speak today and tomorrow at an Institute of International Finance event that takes place on the virtual sidelines of the IMF meetings.
Friday will be the highlight for US economic indicators with releases for September retail sales and industrial production and the Michigan consumer sentiment survey for early October. That's the day after the weekly jobless claims data.
Europe, Middle East, Africa Any surprisingly bad reading of UK labour-market data this week will likely convince a minority of sceptics that more stimulus from the Bank of England is all but inevitable. Central bank officials from
across Europe take part at the IMF and World Bank meetings. But key policy makers will also make virtual appearances elsewhere: European Central Bank Chief Economist Philip Lane and Governing Council members Francois Villeroy de Galhau, Robert Holzmann and Pablo Hernandez de Cos speak at an event on rising public debt and how to cope with it.
In Ghana, inflation data on may show price growth slowed for a second month in September, but remained above the central bank’s target band of six percent to 10 percent. Nigeria on Thursday is expected to report inflation accelerated to 13.3 percent, while Uganda’s central bank will probably hold its key interest rate for a second meeting.
The IMF last week urged Mexico to boost government stimulus to speed up a weak recovery, and output and manufacturing figures posted Monday should underscore the point.
In Brazil by contrast, a less stringent lockdown and the government's massive income support has buoyed demand, suggesting the August economic activity reading out will be consistent with that of a gradual recovery.