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IMF warns rising prices will be worse in UK

The International Monetary Fund (IMF) has doubled down on criticism of the chancellor’s mini-budget, days after warning it will fuel rising prices. The body, which works to stabilise economic growth, admitted tax cuts announced by Kwasi Kwarteng would boost growth in the short-term. But it said the cuts would “complicate the fight” against soaring prices. It expects high prices to last longer in the UK with only Slovakia out of the eurozone set to see higher inflation. Inflation, which measures how the cost of living changes over time, is expected ...

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IMF sees ad hoc taxes on excess profits as ‘problematic’

The International Monetary Fund backs moves by governments to tax companies’ excess profits, but believes such changes must be clearly communicated and cannot apply to already realized profits, the IMF’s top fiscal expert told Reuters. Vitor Gaspar, who heads the IMF’s fiscal affairs department, said taxing excess profits could provide permanent revenue for a country’s budget, but the European Union initiative now being considered was “problematic” because it violated tax certainty. Gaspar, a former Portuguese finance minister, said the IMF believed that the tax system should be clear, predictable and ...

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United States: Continue to tackle macroeconomic challenges while supporting the middle class and preparing for population ageing, says OECD

After a rapid recovery from the pandemic, the U.S. economy faces significant challenges from surging inflation and slowing economic activity, according to a new OECD report. Growth is projected to slow to 1.5% in 2022 and 0.5% in 2023 with inflation and tight financial conditions weighing on spending. Inflationary pressures – driven by strong demand, supply constraints and rising commodity prices following Russia’s war of aggression against Ukraine – have broadened, with services inflation now accelerating. Inflationary pressures may prove persistent, prompting additional monetary tightening. Beyond managing immediate economic developments, ...

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IMF cuts Asia’s growth forecasts, warns of strong dollar strains

The International Monetary Fund cut Asia’s economic growth forecasts on Tuesday, with rising inflation forcing many central banks to tighten monetary policy even as exports face the brunt of slowing growth in trade partners such as the United States. The downgrade underscores heightening uncertainty over Asia’s recovery from the COVID-19 pandemic as darkening growth prospects for the United States, China and the euro zone economies stoke fear of a global recession. Monetary policy divergence from steady U.S. interest rate hikes is likely to continue strengthening the dollar, worsening emerging economies’ ...

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IMF cuts 2023 growth outlook amid colliding global shocks

The International Monetary Fund on Tuesday cut its global growth forecast for 2023 amid colliding pressures from the war in Ukraine, high energy and food prices, inflation and sharply higher interest rates, warning that conditions could worsen significantly next year. The Fund said its latest World Economic Outlook forecasts show that a third of the world economy will likely contract by next year, marking a sobering start to the first in-person IMF and World Bank annual meetings in three years. “The three largest economies, the United States, China and the ...

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Leading indicators continue to indicate slowing growth in most major economies

The OECD Composite Leading Indicators (CLIs), designed to anticipate turning points in economic activity relative to trend with information up to September 2022, continue to indicate slowing growth in the OECD area and in most major economies dragged down by high inflation, increasing interest rates and declining share prices. Among major OECD economies, the CLIs remain below trend and continue to point to slowing growth in Canada, the United Kingdom and the United States, and also in the euro area including France, Germany and Italy. The CLI for Japan continues ...

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IMF warns inflation fight, geopolitical events driving up financial stability risks

The International Monetary Fund warned Tuesday that global financial stability risks have increased, raising the risk of a disorderly repricing in markets, as it pointed to emerging markets and housing markets as particularly vulnerable. The IMF said that “storm clouds” are looming over the global economy, including persistent inflation, a slowdown in China, and ongoing stresses from Russia’s invasion of Ukraine which have driven up the risk of a severe downturn to levels not seen since the onset of the COVID-19 pandemic. In its latest Global Financial Stability Report, the ...

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Strained emerging economies in focus at the IMF World Bank meeting

The annual IMF/World Bank meetings in Washington D.C. from Monday to Saturday will include talks on a number of emerging markets squeezed by rising inflation and borrowing costs against a backdrop of slowing global growth. The economic hit from Russia’s invasion of Ukraine has added to pressures that surfaced during the COVID-19 pandemic and has led many smaller developing economies to turn to the International Monetary Fund in recent months for help. The IMF has approved programmes or financing facilities for 10 countries since the start of the Ukraine war ...

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Russia’s war of aggression against Ukraine generates historic migration flows: More support needed for integration now and possible future return

OECD International Migration Outlook 2022 says that Russia’s war of aggression against Ukraine generated a historic outflow of people, largely women and children, in Europe fleeing the war. By mid-September 2022, close to 5 million individual refugees from Ukraine had been recorded across the EU and other OECD countries. The slowdown of international migration witnessed during the COVID-19 pandemic was reverted in 2021 due to a strong economic recovery, increasing labour needs and a resumption of visa processing. Yet 2022 has been marked by even further flows resulting from Russia’s ...

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OECD unemployment rate was broadly stable in August 2022, reaching 4.9%

The unemployment rate in the OECD was broadly stable in August 2022, increasing slightly to 4.9%, after 4.8% in July and 4.9% in June (Figure 1, Table 1). The unemployment rate was below or equal to the pre-pandemic rate in 80% of OECD countries (Figure 2). The number of unemployed workers in the OECD increased slightly for the first time since April 2021, reaching 33.2 million. The OECD unemployment rate was stable for both women and men in August, at 5.1% and 4.7% respectively. However, the OECD unemployment rate for ...

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Further Delaying Climate Policies Will Hurt Economic Growth

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. ...

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IMF should issue new reserves to help countries tackle overlapping crises – groups

The International Monetary Fund should issue $650 billion in new emergency reserves to help its member countries grapple with overlapping health, food, energy and inflation crises, 140 civil society groups said in a letter to the IMF’s board this week. IMF officials in July said a fresh issuance of Special Drawing Rights (SDR) reserves was among the options for aiding countries struggling with spillovers from Russia’s war in Ukraine, but there were no active discussions on the matter. The World Bank warned last month of the growing risk of a ...

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IMF’s Georgieva sees ‘darkening’ outlook for global economy, rising recession risks

The International Monetary Fund will next week downgrade its forecast for 2.9% global growth in 2023, Managing Director Kristalina Georgieva said on Thursday, citing rising risks of recession and financial instability. Georgieva said the outlook for the global economy was darkening given the shocks caused by the COVID-19 pandemic, Russia’s invasion of Ukraine and climate disasters on all continents, and it could well get worse. “We are experiencing a fundamental shift in the global economy, from a world of relative predictability … to a world with more fragility – greater ...

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IMF says wage-price spirals are rare, but rate hikes needed to quell inflation expectations

New research by the International Monetary Fund shows that sustained wage-price spirals are historically rare, and recent sharp interest rate hikes by central banks are likely to help prevent high inflation expectations from becoming entrenched. In an analytical chapter released on Wednesday from the IMF’s forthcoming World Economic Outlook, the Fund said wage and price hike dynamics in 2020 and 2021 were driven by “highly unusual” COVID-19 pandemic shocks, unlike past episodes that reacted to more conventional economic forces. IMF researchers studied 22 episodes of high inflation and falling real ...

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Current crises underline the need for Germany to overhaul innovation policy to ensure its industries remain competitive, says OECD

Germany needs to adopt a more agile, risk-tolerant and experimental approach to innovation policy if it is to continue to lead in its historical core industries such as automotive manufacturing, machinery, chemicals and pharmaceuticals, and be a champion of the industries of tomorrow, according to a new OECD report. The OECD Review of Innovation Policy: Germany says the COVID-19 pandemic and the effects of Russia’s war on Ukraine have highlighted vulnerabilities in Germany’s economic model: an overreliance on fossil fuels, delayed digitalisation and under-diversified supply chains. This comes as the ...

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