CALIFORNIA: 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 (IMF) 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% for the first time.
Fund officials earlier this month 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.
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 US$500bil in SDRs was blocked in April by the US, the fund’s biggest shareholder, which criticised the plan as inefficient.
“With the virus count rising again in Europe, and stalled stimulus negotiations in the US, a better than expected third quarter is seguing into a worse than expected fourth. Looking into 2021, hopes for a strong rebound depend on containing the second wave of infections, a stimulus breakthrough in Washington DC, and widespread delivery of a vaccine by mid-year, ” said Bloomberg chief economist Tom Orlik.
Elsewhere, the Nobel Prize for Economics is to be awarded in Stockholm today and central banks in Indonesia, Singapore, South Korea, Sri Lanka, Chile and Uganda will hold monetary policy meetings.
Federal Reserve board vice chairmen 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 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.
China returns from the Golden Week Holidays with trade data tomorrow expected to show the export recovery continues, and inflation data on Thursday likely to show a moderation in price growth.
Indonesia, Singapore, South Korea and Sri Lanka have monetary policy meetings scheduled through the week. On Thursday, a speech from the Reserve Bank of Australia governor will be closely watched for any signals he’s preparing to add stimulus, while employment data for September will be released.
Any surprisingly bad reading of UK labour-market data this week will likely convince a minority of skeptics that more stimulus from the Bank of England is all but inevitable.
By contrast, data in Sweden, which adopted much lighter virus restrictions than the rest of Europe, will reveal whether the trend of decreasing joblessness will continue. In eastern Europe, Poland, the Czech Republic, Romania and Serbia all release inflation data.
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 and Pablo Hernandez de Cos speak on rising public debt. — Bloomberg
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