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Building Defenses Against the Next Economic Downturn

The global economy faces a number of complex challenges from technological change and globalization, and the lingering effects of the 2008-9 financial crisis. At the same time, we are witnessing lower levels of trust in the core institutions that have helped to deliver tremendous growth and prosperity over the past 40 years. These developments threaten to fragment the international order that has governed the global economy. The symptoms of this fragmentation include rising trade tensions, discord with and within some multilateral institutions, and a dilution of efforts to address the ...

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IMF – No-deal Brexit is biggest risk to Britain’s economy

An exit by Britain from the European Union without a framework agreement to preserve some economic integration is the biggest near-term risk to the British economy, an International Monetary Fund spokesman said on Thursday. IMF spokesman Gerry Rice told reporters that all Brexit outcomes will entail costs, because they will raise impediments to the current “frictionless” single market with the EU. “Leaving without a withdrawal agreement and a framework for the future relationship with the EU is the most significant near-term risk to the UK economy,” Rice said. Source: Reuters ...

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OECD: Confirmed signs of easing growth momentum in most major economies

Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend six to nine months ahead, continue to point to easing growth momentum in most major economies. In the United States and Germany, the tentative signs of easing growth momentum, that were flagged in last month’s assessment, have been confirmed with easing growth momentum remaining the assessment for Canada, the United Kingdom and the euro area as a whole, including France and Italy. In Japan, the CLI continues to point to stable growth momentum. Among major ...

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Oil price volatility underscores need for more Gulf reforms – IMF

Recent volatility in oil prices is underscoring the need for Gulf counties to continue reforms to diversify economies and encourage strong, and inclusive growth, according to the International Monetary Fund (IMF). Two IMF papers say greater openness to trade and foreign investment and more developed and inclusive financial sectors can help attain these goals. One report said foreign trade in the GCC has been expanding robustly, though with limited non-oil exports but foreign direct investment inflows have stalled in recent years despite measures to reduce red tape and provide incentives. ...

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IMF says trade war already hurting Asia, may cut global growth forecasts

Trade frictions between China and the United States are already affecting business confidence and investment in Asia, a senior International Monetary Fund official said, warning that the fund could further cut its global growth forecasts in January. Changyong Rhee, director of the IMF’s Asia and Pacific Department, said Japan and South Korea could be among countries in the region hit hardest by the trade war given their reliance on exports to China. “Investment is much weaker than expected. My interpretation is that the confidence channel is already affecting the global ...

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Five Actions to Strengthen the Euro Area Banking Union

Dealing with problem banks in a prompt, efficient, and even-handed manner is essential for the European banking union. Much progress has been made, but more needs to be done to strengthen both institutions and practices. We outline the recommendations in this area proposed as part of the IMF’s recent assessment of the euro area financial sector. Having in place a sound framework and the operational capacity to handle problem banks is critical to “leveling the playing field” in the banking union and to reducing risks. A truly common system is ...

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Japan can temporarily boost spending to ease sales tax pain – IMF

Japan should ensure that spending measures to ease the pain on the economy from next year’s scheduled sales tax hike are temporary and well-communicated, a senior International Monetary Fund official said on Monday. Paul Cashin, the IMF’s mission chief for Japan, also said the country’s central bank should maintain its massive stimulus despite the rising costs, including the strain on regional banks’ profits from near-zero rates. “In our view, the so-called side-effects are not large enough to outweigh the benefits at present,” he said, adding that the Bank of Japan ...

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Trump Snubs Global Order Again as U.S. Rejects IMF Funding Boost

The U.S. is opposing an increase to the IMF’s permanent capital levels, President Donald Trump’s latest snub of multilateral organizations as he pursues his “America First” foreign policy. The International Monetary Fund is examining its capital levels under a regularly scheduled review. The Washington-based fund is mostly financed by shares, known as quotas, paid by its 189 member nations. Managing Director Christine Lagarde has argued that an adequately funded IMF is a key pillar of the financial “safety net” that the world relies on during crises. The fund agreed to ...

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IMF warns storm clouds gathering for global economy

One of the International Monetary Fund’s top officials warned on Tuesday that storm clouds were gathering over the global economy and that governments and central banks might not be well- equipped to cope. The fund had been urging governments to “fix the roof” during a sunny last two years for the world economy, IMF First Deputy Managing Director David Lipton said. “But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,” he said at a banking conference hosted by Bloomberg. He ...

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IMF departing chief economist warns on U.S. growth

Maurice Obstfeld, the retiring chief economist of the International Monetary Fund, is on his way out the door with a warning that global growth is slowing and the U.S. will likely feel the drag as well. “The slowdown outside the U.S., to the extent we’re seeing signs of that, seems to be more dramatic,” Mr. Obstfeld said in an interview with reporters before his end-of-the-year departure from the IMF. His assessment was a rhetorical downgrade from October, when the IMF’s official forecasts characterized global growth as “steady” or “plateauing.” Mr. ...

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Easing growth momentum in the OECD area

Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend six to nine months ahead, continue to point to easing growth momentum in the OECD area as a whole. Easing growth momentum remains the assessment for the United Kingdom, Canada and the euro area as a whole, including Germany, France and Italy, with similar signs now also emerging in the United States. In Japan, the CLI continues to point to stable growth momentum. Among major emerging economies, stable growth momentum remains the assessment for the ...

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IMF’s Departing Chief Economist Issues a Rare Warning on U.S. Growth

Maurice Obstfeld, the retiring chief economist of the International Monetary Fund, is on his way out the door with a warning that global growth is slowing and the U.S. will likely feel the drag as well. “The slowdown outside the U.S., to the extent we’re seeing signs of that, seems to be more dramatic,” Mr. Obstfeld said in an interview with reporters before his end-of-the-year departure from the IMF. His assessment was a rhetorical downgrade from October, when the IMF’s official forecasts characterized global growth as “steady” or “plateauing.” Mr. ...

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Lagarde Warns Impatient Markets That U.S.-China Deal Isn’t Easy

International Monetary Fund Managing Director Christine Lagarde urged investors against reacting to every twist and turn of the trade war, saying that a lasting U.S.-China deal will take a “long time.” Lagarde, speaking in an interview on CNBC Thursday, said she expects that the U.S. and China can identify a framework deal over trade during their 90-day cease-fire period. President Donald Trump and China’s Xi Jinping agreed Saturday to halt any escalation of tariffs as they work out a broader deal on issues including China’s alleged theft of intellectual property. ...

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Tax revenues continue increasing as the tax mix shifts further towards corporate and consumption taxes

Tax revenues in advanced economies have continued to increase, with taxes on companies and personal consumption representing an increasing share of total tax revenues, according to new OECD research. The 2018 edition of the OECD’s annual Revenue Statistics publication shows that the OECD average tax-to-GDP ratio rose slightly in 2017, to 34.2%, compared to 34.0% in 2016. The OECD average is now higher than at any previous point, including its earlier peaks of 33.8% in 2000 and 33.6% in 2007. An increase in tax-to-GDP levels was seen in 19 of ...

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Lagarde warns G20 leaders that trade tensions threaten global economy

International Monetary Fund Managing Director Christine Lagarde called on G20 leaders to urgently de-escalate trade tensions and reverse tariff hikes, warning that they risked slowing global growth. “Pressures on emerging markets have been rising and trade tensions have begun to have a negative impact, increasing downside risks,” Lagarde said in a statement issued at the conclusion of the G20 summit in Buenos Aires. Source: Reuters (Reporting by Cassandra Garrison, editing by Ross Colvin)

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