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The IMF has been encouraging governments to spend what they need to deal with the crisis.
- The International Monetary Fund and the World Bank will hold their annual meetings this week.
- Both are calling on the Group of 20 largest economies to extend a freeze on debt payments for the world’s poorest nations that expires at the end of the year.
- The IMF has been warning that debt as a percentage of GDP will rise to around 100% for the first time.
The guardians of the global economy will gather this week under the cloud of the worst recession since the Great Depression and a recovery that will depend on scientists finding a vaccine against the coronavirus.
The International Monetary Fund and the World Bank will hold their annual meetings, and both will ask the Group of 20 largest economies to extend the freeze on debt payments for the world’s poorest nations that expires at the end of the year.
While last month the fund signaled a “small upward revision” to its 2020 growth forecast from its June outlook, it warned that the rally will be long and uneven.
The IMF has been encouraging governments to spend what they need to deal with the crisis, even warning that debt as a percentage of GDP will rise to around 100% for the first time.
Earlier this month, Fund officials proposed debt restructuring reforms for countries struggling to meet their obligations, a burden likely to increase as the pandemic hits economies. Debt vulnerabilities will be a key topic of the meetings, according to First Deputy Managing Director Geoffrey Okamoto.
The G-20 agreed in April to forfeit billions of dollars in repayments from the poorest nations until the end of the year under the Debt Service Suspension Initiative. The World Bank says this is not enough and wants loans to be reduced to avoid further consequences.
Powerful IMF 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 countries that do. A proposal to create $ 500 billion in SDR was blocked in April by the United States, the fund’s largest shareholder, which criticized the plan as ineffective.
USA and Canada
Federal Reserve Board Vice Chairman Richard Clarida and Randal Quarles are scheduled to speak Wednesday and Thursday at an Institute of International Finance event that takes place on the virtual sidelines of IMF meetings.
Friday will be the climax for US economic indicators with releases for retail sales and industrial production for September and the Michigan consumer sentiment survey for early October. That’s the day after the weekly jobless claims data.
Asia
China is returning from the Golden Week holiday and trade data on Tuesday is expected to show the recovery in exports continues, and inflation data on Thursday is likely to show a moderation in price growth.
Indonesia, Singapore, South Korea and Sri Lanka have monetary policy meetings scheduled during the week. On Thursday, a speech by the Governor of the Reserve Bank of Australia will be closely watched for any signs that he is preparing to add stimulus, while employment data for September will be released.
Europe, Middle East, Africa
Any surprisingly bad reading of UK labor market data this week will likely convince a minority of skeptics that further stimulus from the Bank of England is almost inevitable.
By contrast, data from Sweden, which adopted much lighter virus restrictions than the rest of Europe, will reveal whether the downward trend in unemployment will continue. In Eastern Europe, Poland, the Czech Republic, Romania and Serbia publish inflation data.
Central bank officials from across Europe participate in 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 Hernández de Cos, will speak at an event about the increase in public debt and how to deal with it.
Turkish data on Monday is likely to show that the nation ran a current account deficit for the ninth consecutive month as households hoard imported gold and foreign currencies to hedge against lira depreciation and inflation.
In Ghana, inflation data on Wednesday may show that price growth slowed for a second month in September but remained above the central bank’s target band of 6-10%. Nigeria is expected to report on Thursday that inflation has accelerated to 13.3%, while Uganda’s central bank will likely hold its key interest rate for a second meeting.
Latin America
Last week, the IMF urged Mexico to boost government stimulus to accelerate a weak recovery, and production and manufacturing figures released Monday should underscore the point.
In Brazil, by contrast, a less stringent lockdown and massive government revenue support have boosted demand, suggesting that Thursday’s August reading of economic activity will be consistent with that of a gradual recovery.
Although inflation is picking up again in the region, it has never disappeared in Argentina: analysts expect monthly rates of just under 3% and annual rates close to 40%.
Chile’s economy is struggling, but the central bank’s key rate is at a record low of 0.5%. Look for policy makers to keep you there for a seventh month when they meet on Thursday.
