## IMF Survey : The Global Economy in 2016

_IMF News, January 4, 2016_

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## Bibliographic details
- Published: January 4, 2016

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### Overview
- Interview with Maury Obstfeld, who joined the IMF in September as Economic Counsellor and Director of Research.
- Review of major economic developments in 2015 and forward-looking issues for 2016.
- Key institutional milestones in 2015 noted: U.S. Congress passed the 2010 quota reform; China’s currency, the yuan, was added to the IMF’s basket of official currencies.
- Date on page: January 4, 2016.

### Major developments in 2015
- Divergent performance:
  - U.S. economy: continued solid growth and job creation.
  - Europe: generally picked up speed.
  - Japan: described as “a question mark.”
  - Emerging and developing economies: continued to slow, with some exceptions (such as India), affected by plummeting commodity prices and tighter financial conditions.
- Geopolitical and political tensions amplified economic challenges in some countries.
- Institutional change: U.S. Congress approved IMF quota reform originally agreed in 2010, strengthening the IMF’s capacity.

### Risks and issues to watch in 2016
- China:
  - Economy slowing during transition from investment and manufacturing to consumption and services.
  - Global spillovers through diminished imports and lower commodity demand larger than anticipated.
  - Remaining challenges: state-owned enterprise balance sheet weaknesses, financial market strains, and resource allocation flexibility.
  - Risk that growth below official targets could spook global financial markets; alternatively, methods of enforcing growth targets could extend imbalances.
- Refugee crisis:
  - Crisis of refugees fleeing Iraq and Syria challenges EU absorptive capacity of labor markets and political systems.
  - Special strain on Lebanon, Jordan, and Turkey.
  - EU perimeter policing and free mobility tensions to watch.
- Climate change:
  - Slow-moving but critical crisis; COP21 Paris agreement seen as a triumph for international cooperation.
  - 2016 expected to show national capital reactions and initial effectiveness of the agreement in promoting cooperation.
- International trade:
  - Trade growth has slowed relative to GDP growth.
  - Key questions: whether the Trans-Pacific Partnership (TPP) will pass the U.S. Congress (decision possibly in spring 2016) and whether that could lead to a U.S.–EU deal.
  - Doha round effectively scrapped in Nairobi; consideration of more limited-scale trade liberalization options.

### Emerging markets and financial conditions
- Emerging markets central in 2016 outlook:
  - Capital inflows are down.
  - Some reserves have been spent.
  - Sovereign spreads have widened.
  - Currencies have weakened.
  - Growth is slowing sharply in some countries.
- Currency depreciation has been an important buffer against shocks to date.
- Sharp further falls in commodity prices, including energy, would worsen conditions for exporters and could trigger sharper depreciations, hidden balance sheet vulnerabilities, or inflation.
- Global financial market mood: glum and susceptible to increased volatility despite accommodation from the European Central Bank and the Bank of Japan.
- U.S. Federal Reserve: launched in December what it intends to be a cycle of gradual interest-rate hikes; critical how subsequent increases are managed and communicated.
- Concluding assessment: global financial conditions are tightening; emerging and developing markets are especially sensitive.

### Analytical and research priorities for the IMF
- Need for intensified focus on emerging and developing economies:
  - Historical PPP shares: during the 1980s emerging and developing economies accounted for around 36 percent of global GDP and some 43 percent of global GDP growth (with PPP weights).
  - For 2010-2015, the numbers were 56 percent and 79 percent, respectively.
- Research agenda items:
  - Classic balance of payments issues: capital flows and their management, foreign exchange intervention, vulnerabilities in external balance sheets, determinants of current account balances, trade patterns, and trade volumes.
  - Policies and frameworks conducive to higher potential output and its growth.
  - Investigation of reasons for apparent worldwide declines in potential GDP growth; April 2016 WEO to examine advanced-economy structural reforms in that context.
  - Trends in inequality: implications for economic productivity and political sustainability of market-friendly policies; how to make growth more inclusive.
  - Integration of the financial sector into macro-policy frameworks as an urgent priority.
- Broader remit:
  - The Fund’s global scope: engages with 188 member countries and draws on 70 years’ experience of multilateral surveillance, Article IV consultations, and technical assistance.
  - Historical and recent contributions cited: exchange rates and trade, global real interest rates, fiscal policy, capital flows, public infrastructure spending, the investment accelerator.
  - Emphasis on reassessing doctrines and policies in light of experience and research; intellectual honesty in admitting mistakes and adapting.

### Fund’s role on “new” topics (climate change, inequality, labor markets)
- Recognition that IMF resources are not unlimited; selection of areas where IMF has comparative analytical advantage is necessary.
- IMF has long engaged with macro-critical issues relevant to membership, such as women’s labor-force participation and labor-market institutions.
- Prior IMF work cited:
  - April 2008 WEO chapter on global CO2 emissions and macroeconomic effects of carbon pricing.
  - Fiscal Affairs department’s recent work on energy subsidies and carbon pricing.
  - Managing Director Christine Lagarde emphasized these topics in lead-up to the Paris agreement.
- Conclusion: newer topics with significant macroeconomic implications are too important to ignore for a member-focused approach.

*IMF Survey: The Global Economy in 2016 — IMF, January 4, 2016*

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## Content in this bundle

- [Int010416aapdf (PDF)](/-/media/websites/imf/imported/external/arabic/pubs/ft/survey/so/2016/int010416aapdf.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Survey Interview](https://www.imf.org/en/news/search)
- [Maury Obstfeld bio](https://www.imf.org/external/np/bio/eng/mo.htm)
- [Research at the IMF](http://www.imf.org/external/research/index.aspx)
- [Economic Outlook: October 2015](http://www.imf.org/external/pubs/ft/weo/2015/02/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/soint010416a_