## Opening Remarks by the Deputy Managing Director, Kenji Okamura

_IMF News, November 17, 2022_

## Source details

**Canonical URL:** [Opening Remarks by the Deputy Managing Director, Kenji Okamura](https://www.imf.org/en/news/articles/2022/11/16/sp111722dmdokamura-oap-conference)

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## Bibliographic details
- Published: November 17, 2022

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### Event and context
- Remarks delivered at the conference on Managing Financial Risks in a Shock Prone World - Lessons from the past and challenges ahead
- Location: Tokyo
- Date: November 17, 2022
- Hosted with the University of Tokyo’s Center for Advanced Research in Finance; Regional Office for Asia and the Pacific provided organizational leadership

### Outlook
- The global economy is facing a riskier and more shock-prone environment.
- Three powerful forces holding back the global economy:
  - i) the Russian invasion of Ukraine;
  - ii) the need to tighten monetary policy, amid a cost-of-living crisis and persistent and broadening inflation pressures; and,
  - iii) the slowdown in China.
- IMF growth projections referenced:
  - Global growth slowed from 6.0 percent last year to 3.2 percent this year (projection given during the IMF Annual Meetings one month prior).
  - For 2023, the IMF lowered its forecast to 2.7 percent.
- Financial stability and vulnerability observations:
  - Financial stability risks have increased with rising interest rates.
  - Vulnerabilities are elevated in the sovereign and nonbank financial institutions sectors.
  - Banks in advanced economies appear to be in a stronger position due to regulatory reform efforts following the Global Financial Crisis.
- Pressures on emerging markets and developing countries:
  - Subject to capital outflows, dollar strength, and volatile commodity prices.
  - Many are dealing with elevated debt levels pushed up by the pandemic.
  - Rising global interest rates increase difficulty of sustaining debt burdens.
  - More than 60 percent of low-income countries and over 25 percent of emerging markets are in or at risk of debt distress.
- Other systemic risks:
  - Natural disasters are causing human suffering and economic losses; climate change is making these events more severe and frequent.
  - Geoeconomic fragmentation risks damaging global production and trade networks with adverse consequences for growth and inflation.
  - Climate and cyber-related vulnerabilities identified as potential sources of major shocks.

### Policy priorities
- Bring inflation back to central bank targets:
  - Stay the course on monetary policy despite near-term costs in terms of lower growth and higher unemployment.
  - Emphasis that failing to control inflation now would lead to much greater and longer-lasting pain later.
  - Recognizes challenge of getting monetary policy settings just right amid heightened uncertainty.
- Fiscal policy guidance:
  - Broad fiscal support was appropriate during the pandemic but is unsustainable over the longer run and would add fuel to inflation.
  - Fiscal support should be targeted to protect the most vulnerable from rising prices.
  - Broad energy subsidies should be avoided as they are generally regressive and ineffective.
  - Fiscal buffers should be rebuilt, and debt reduced.
  - Timely, effective, and well-coordinated debt resolution mechanisms are needed, building on progress under the G20 Common Framework.
- Policy responses for countries facing capital outflows:
  - Recommendations are country specific.
  - Exchange rate flexibility helps, especially when foreign currency debt is low.
  - For some emerging market economies, a mix of tools could be helpful: interest rate policy, macroprudential actions, foreign exchange intervention, and capital flow management measures to mitigate monetary policy tradeoffs and reduce financial stability risks.
- Building resilience to new shocks:
  - Prioritize strengthening resilience to climate risks and cyber-related vulnerabilities.

### Conclusion
- The world economy and financial systems are grappling with the legacy of the pandemic and Russia’s invasion of Ukraine.
- Shocks are likely to be more frequent in the future; preparation requires building buffers and strengthening resilience.
- Conferences provide a platform to exchange experiences, learn from one another, and develop novel ideas; the speaker looks forward to insightful and open discussions.

*Opening Remarks by the Deputy Managing Director, Kenji Okamura, Tokyo, November 17, 2022 (International Monetary Fund).*

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## References

- [Kenji Okamura](https://www.imf.org/en/About/senior-officials/Bios/kenji-okamura)
- [Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2022/11/16/sp111722dmdokamura-oap-conference_