{
  "title": "The Role of Emerging Markets in a New Global Partnership for Growth by IMF Managing Director Christine Lagarde",
  "publication": "IMF News, February 4, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp020416",
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  "summary": "Speech by Ms. Christine Lagarde, Managing Director, International Monetary Fund University of Maryland, February 4, 2016",
  "authors": [
    "Christine Lagarde"
  ],
  "publishDate": "2016-02-04",
  "sections": [
    {
      "heading": "Importance of emerging markets: scale and everyday links",
      "content": "- Emerging and developing economies are home to 85 percent of the world’s population—6 billion people.\n- As a group, emerging and developing economies now account for almost 60 percent of global GDP, up from just under half only a decade ago.\n- They contributed more than 80 percent of global growth since the 2008 financial crisis.\n- China alone has lifted more than 600 million people out of poverty over the past three decades.\n- World Bank estimates: in 2012, 12.7 percent of the world’s population lived at or below $1.90 a day; that is down from 37 percent in 1990 and 44 percent in 1981."
    },
    {
      "heading": "A new partnership for growth: rationale and goals",
      "content": "- Current reality: emerging markets’ growth rates are down, capital flows have reversed, and medium-term prospects have deteriorated sharply.\n- Last year, emerging markets saw an estimated $531 billion in net capital outflows, compared with $48 billion in net inflows in 2014.\n- On current IMF forecasts, emerging and developing economies will converge to advanced economy income levels at less than two-thirds the pace predicted a decade ago.\n- Risks of slower convergence: rising inequality, protectionism, and populism.\n- Objective: forge a “new partnership for growth” in which both emerging and advanced economies act to promote faster and more sustainable convergence."
    },
    {
      "heading": "Key challenges facing emerging markets and spillovers",
      "content": "- Definition and diversity:\n  - Emerging markets: a group of about 30-50 countries in transition—not too rich, not too poor, and not too closed to foreign capital.\n  - These countries are diverse; examples: Brazil and Russia in recession, India and Mexico enjoying robust growth.\n- Main challenges:\n  - China’s growth transition: rebalancing from industry to services, exports to domestic demand, and investment to consumption; short-term slower growth with trade, commodity, and financial spillovers.\n  - Declining commodity prices: oil and metals prices have fallen by around two-thirds from their most recent peaks; many commodity-exporting emerging economies under severe stress with large currency depreciations.\n  - Asynchronous monetary policies: Federal Reserve rate normalization has contributed to a rise of the U.S. dollar, straining emerging market firms with US dollar-denominated debt.\n  - Financial vulnerabilities: the corporate debt of nonfinancial firms across major emerging markets quadrupled to more than $18 trillion between 2004 and 2014 (October 2015 GFSR).\n  - Geopolitical and environmental risks: Syrian refugee crisis affecting Turkey, Lebanon, Jordan; climate change impacts—by 2030 it is expected that more than 98 percent of deaths related to climate change will occur in developing countries.\n- Spillovers and spillbacks:\n  - Financial spillovers: Chinese exchange rate changes and stock market plunges can trigger global market reactions.\n  - Trade spillovers: global trade slowdown partly due to China; trade between emerging and advanced economies now exceeds trade among advanced economies.\n  - Economic spillovers: IMF estimates a slowdown of one percent in the emerging world would reduce growth in advanced countries by about 0.2 percentage points.\n  - Environmental spillovers: over the next 15 years, there may be up to $90 trillion in global infrastructure investment, mostly in emerging and developing economies—risk of locking in carbon-intensive systems."
    },
    {
      "heading": "Mutual responsibilities: what emerging and advanced economies should do",
      "content": "- Actions for commodity-exporting emerging economies:\n  - Upgrade spending efficiency, strengthen fiscal institutions, and increase non-commodity revenues to make fiscal adjustment less painful.\n  - Allow greater exchange rate flexibility to absorb adverse external shocks.\n  - Use macroprudential tools to limit financial sector risks, including monitoring foreign currency debt and limiting fallout from large credit expansions.\n- Actions for advanced economies:\n  - Continue accommodative monetary policies to support demand, but adopt a more balanced policy mix that includes fiscal policy where room exists (for example, funding infrastructure).\n  - The United States should normalize monetary policy prudently and with clear communication to limit global spillovers and spillbacks.\n- Joint priorities for both groups:\n  - Foster more and better innovation by removing barriers to competition, cutting red tape, enhancing labor mobility, and investing more in education and research.\n  - Facilitate greater sharing of technology between advanced and emerging economies, including rethinking aspects of patent protection and intellectual property balance.\n  - Promote foreign direct investment: FDI into emerging and developing economies, as a share of GDP, is now well below what it was in 2000-06; global forecasts predict it will fall even further by the end of the decade.\n  - Promote trade reforms and integration: global trade growth has slowed relative to pre-2008 trends; increased trade liberalization is needed.\n  - Complete and implement the global regulatory reform agenda to create a more resilient global financial system."
    },
    {
      "heading": "Global measures and the IMF’s role",
      "content": "- International monetary system challenges:\n  - The system governs exchange rates, international capital movements, reserves, and official liquidity arrangements (the global financial safety net).\n  - The system has become more fragmented and asymmetric; many emerging economies lack access to advanced-country swap lines, prompting large foreign-exchange reserve accumulation.\n- Safer capital flows:\n  - Capital flows rose sharply over recent decades: between 1980 and 2007 global capital flows increased more than 25-fold, compared with an eight-fold expansion in global trade.\n  - Policy ideas: shift toward more long-term, equity-based capital flows; adjust supervisory frameworks in source countries to ensure prudent capital behind short-term debt-creating flows; strengthen macroprudential policies in recipient countries; reconsider tax policies that bias toward debt (interest deductibility).\n- Stronger global financial safety net:\n  - Components: countries’ foreign-exchange reserves, swap lines, regional financial arrangements, and the IMF.\n  - Strengthening options: broaden and strengthen precautionary financing instruments, increase size and coverage of the safety net to reduce the need for self-insurance and free capital for investment in infrastructure, health, and education.\n  - IMF actions: membership-approved Quota and Governance Reforms came into effect last week, doubling the IMF’s permanent resources and enhancing representation of dynamic emerging and developing economies.\n  - Institutional role: the IMF monitors economic and financial stability of its 188 members, provides financial support in times of distress, and offers technical assistance and training.\n  - Result: for the first time, emerging market countries like Brazil, China, India, and Russia are now among the 10 largest shareholders of the Fund."
    },
    {
      "heading": "Conclusion: implications for policy and future leaders",
      "content": "- A new economic reality: the rising role of emerging and developing economies is a defining feature of the 21st century and affects advanced economies as well.\n- Policy imperative: both emerging and advanced economies must act multilaterally to promote growth, manage spillovers, and support sustainable convergence.\n- Call to action for future leaders: promote climate change awareness, combat excessive inequality, and insist on the highest standards of ethical behavior to help forge a “new multilateralism” and a new partnership for growth.\n\nSpeech by Christine Lagarde, Managing Director, International Monetary Fund, University of Maryland, February 4, 2016.\n\n---\n\n Content in this bundle\n\n- Nce Global Report Web (PDF){rel=\"external\" type=\"application/pdf\"}\n- 020416apdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- 020416cpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- 020416jpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- 020416rpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- India and the IMF\n- United States and the IMF\n- People's Republic of China and the IMF\n- Speeches\n- Christine Lagarde\n- PRESS CENTER\n- Blog\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp020416"
    }
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    "Authors: Christine Lagarde",
    "Published: February 4, 2016",
    "Emerging and developing economies are home to 85 percent of the world’s population—6 billion people.",
    "As a group, emerging and developing economies now account for almost 60 percent of global GDP, up from just under half only a decade ago.",
    "They contributed more than 80 percent of global growth since the 2008 financial crisis.",
    "China alone has lifted more than 600 million people out of poverty over the past three decades.",
    "World Bank estimates: in 2012, 12.7 percent of the world’s population lived at or below $1.90 a day; that is down from 37 percent in 1990 and 44 percent in 1981.",
    "Current reality: emerging markets’ growth rates are down, capital flows have reversed, and medium-term prospects have deteriorated sharply.",
    "Last year, emerging markets saw an estimated $531 billion in net capital outflows, compared with $48 billion in net inflows in 2014.",
    "On current IMF forecasts, emerging and developing economies will converge to advanced economy income levels at less than two-thirds the pace predicted a decade ago.",
    "Risks of slower convergence: rising inequality, protectionism, and populism.",
    "Objective: forge a “new partnership for growth” in which both emerging and advanced economies act to promote faster and more sustainable convergence.",
    "Definition and diversity:",
    "Main challenges:",
    "Spillovers and spillbacks:",
    "Actions for commodity-exporting emerging economies:",
    "Actions for advanced economies:",
    "Joint priorities for both groups:",
    "International monetary system challenges:",
    "Safer capital flows:",
    "Stronger global financial safety net:",
    "A new economic reality: the rising role of emerging and developing economies is a defining feature of the 21st century and affects advanced economies as well.",
    "Policy imperative: both emerging and advanced economies must act multilaterally to promote growth, manage spillovers, and support sustainable convergence.",
    "Call to action for future leaders: promote climate change awareness, combat excessive inequality, and insist on the highest standards of ethical behavior to help forge a “new multilateralism” and a new partnership for growth.",
    "[Nce Global Report Web (PDF)](/external/pubs/ft/fandd/2015/12/%20http:/2014.newclimateeconomy.report/wp-content/uploads/2014/08/nce-global-report_web.pdf){rel=\"external\" type=\"application/pdf\"}",
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    "[India and the IMF](http://www.imf.org/external/country/IND/index.htm)",
    "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)",
    "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[Christine Lagarde](https://www.imf.org/external/np/omd/bios/cl.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Blog](https://www.imf.org/external/pubs/ft/fandd/2015/12/stern.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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