IMF Annual Report 2019

Our Connected World

Asia and the Pacific

Aerial view of Bangkok, Thailand
Bangkok, Thailand

Regional Highlights

The ASEAN Way book cover
IMF Managing Director Christine Lagarde, finance ministers, and the Board of Governors pose for a group photo at the Bali Nusa Dua Convention Centre at the 2018 IMF–World Bank Annual Meetings in Bali, Indonesia

IMF Managing Director Christine Lagarde, finance ministers, and the Board of Governors pose for a group photo at the Bali Nusa Dua Convention Centre at the 2018 IMF–World Bank Annual Meetings in Bali, Indonesia. IMF Staff Photo/Stephen Jaffe

2018 Annual Meetings in Indonesia

More than 11,000 people from around the world gathered in Bali, Indonesia, for the 2018 IMF–World Bank Annual Meetings.

The meetings, the first to be held in Southeast Asia since the 2006 meetings in Singapore, came at a time of concern about plateauing growth and increasing trade tensions. In response, the IMF called for a “new multilateralism” to address the challenges of trade, turbulence, and trust. In this spirit, the IMF, with the World Bank and other partners, released the Bali Fintech Agenda, a blueprint for policymakers who are seeking to manage new risks while harnessing fintech’s potential for the benefit of all.

The Annual Meetings also served as an occasion to demonstrate Indonesia’s expanding role on the global stage and showcase its rich culture. History was made as leaders from all 10 Association of Southeast Asian Nations (ASEAN) attended the meetings for the first time.

Ahead of the Annual Meetings in Indonesia, the IMF’s Asia and Pacific Department released two books—Realizing Indonesia’s Economic Potential and The ASEAN Way—to highlight the IMF’s policy recommendations on economic growth in Southeast Asia.

Realizing Indonesia’s Economic Potential

Through a comprehensive and integrated macroeconomic analysis, the book Realizing Indonesia’s Economic Potential highlights Indonesia’s remarkable progress during the past two decades. Prudent policies and structural reforms have yielded strong and stable economic growth, raising living standards for millions of people. But the book also stresses that policies need to adapt constantly to a changing economic landscape to ensure continued prosperity. It shows that a well-designed package—comprising fiscal, structural, and financial reforms—could boost annual growth by 1 percentage point—to 6.5 percent in the medium-term.


The book The ASEAN Way shares the economic resurgence during the past two decades of the five founding members of the Association of Southeast Asian Nations—the ASEAN-5: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. This includes the consensus-based “ASEAN Way” of collaborating and integrating trade, finance, and labor markets on the path toward an ASEAN Economic Community. This approach has served the region well in the past two decades and is likely to continue to do so in the period ahead.

Supporting China’s Reform Agenda: People’s Bank of China–IMF Conference on Opening Up and Competitive Neutrality

As China shifts from high-speed to high-quality growth while aiming to control corporate leverage, it is more important than ever to ensure that resources are allocated efficiently and without regard for ownership type (state owned, private, foreign, or domestic) or company size.

Creating such an environment of “competitive neutrality” is challenging and has been the focus of a number of countries and international organizations. Recently, the Chinese authorities have put competitive neutrality at the top of their reform agenda. To support the agenda, the IMF and the People’s Bank of China organized the Seventh High-Level Conference on Opening Up and Competitive Neutrality in April 2019 to assess existing developments, discuss the authorities’ reform plans, and—based on international experience—suggest reforms.

The conference brought together international and domestic experts, financial sector regulators, and international organizations, as well as private sector representatives. Insight from the conference is an integral part of the 2019 Article IV Consultations and is likely to be reflected in IMF capacity-building activities, including through the new China-IMF Capacity Development Center and in the context of cooperative agreements with some of the respective government agencies.

IMF Managing Director Christine Lagarde is greeted by Indonesia President Joko Widodo
IMF Managing Director Christine Lagarde is greeted by Indonesia President Joko Widodo prior to an ASEAN dinner during the 2018 IMF–World Bank Annual Meetings in Bali, Indonesia. IMF Staff Photo/Stephen Jaffe

Realizing Indonesia's Economic Potential

Sub-Saharan Africa

Green hills in Western Rwanda
Western Rwanda

Regional Highlights

The Future of Work in Sub-Saharan Africa book cover

The Future of Work in Sub-Saharan Africa

Sub-Saharan Africa needs to create 20 million jobs annually over 20 years to absorb its growing workforce. The African Department’s study “The Future of Work in Sub-Saharan Africa” found that the region may lose fewer jobs to automation than advanced economies because of differences in economic structure and wage levels. However, automation is likely to reduce low-skill job opportunities. Integration and connectivity are key for job creation. Traditional and digital infrastructure, an education system keeping pace with changing skill requirements, smart urbanization, safety nets for a volatile labor market, and trade integration are essential for inclusive growth.

Central African Economic and Monetary Community region and IMF engagement

The Central African Economic and Monetary Community (CEMAC) strategy has helped to avert a crisis, despite continued headwinds. Monetary policy tightening, progress toward finalizing the new monetary policy framework, and foreign exchange regulations have supported macroeconomic adjustment. However, two countries have still not entered financing arrangements with the IMF. Foreign exchange reserves have underperformed, despite higher-than-projected oil prices. Addressing downside risks is essential for CEMAC’s economic recovery. Delays in the adoption of IMF-supported programs with the Republic of Congo and Equatorial Guinea, lower oil prices, and tighter global financial conditions could undermine the recovery. Economic diversification, improving the business environment, and alleviating the perception of corruption would help improve CEMAC countries’ growth prospects.

Country focus: Angola and Rwanda

The IMF’s engagement with Angola and Rwanda exemplifies our work in the region during FY2019.

The Extended Fund Facility with Angola in the amount of $3.7 billion (361 percent of quota) was approved in December 2018. The program aims to strengthen fiscal discipline, reduce inflation, promote exchange rate flexibility, improve financial sector stability, and address pressure on correspondent banking relationships. The program promotes policy discipline, providing positive signals to stakeholders.

Rwanda successfully completed its IMF arrangement under the Policy Support Instrument. The Executive Board approved the 10th and final review in November 2018, and the program expired December 1, 2018, after five years. The program helped maintain macroeconomic stability while supporting inclusive growth and poverty reduction. The Rwandan authorities and IMF staff have reached a staff-level agreement on policies that could support a forthcoming request for a successor program supported by the IMF.

Podcast: Future of Work


River Dordtse, Netherlands
River Dordtse, Netherlands

Regional Highlights

Figure 1.6

Long-term impact of Brexit

Decline in the level of output compared to a non-Brexit scenario, in percent

Bar graph showing the decline in the level of output compared to a non-Brexit scenario
Source: IMF Euro Area Selected Issues: "Long-term impact of Brexit on the EU." IMF Country Report No. 18/224.

The Long-Term Impact of Brexit on the European Union

Bonds between the economies of the European Union and the United Kingdom run deep. As Brexit brings with it more friction in the economic relationship, there will be costs on both sides, as an IMF staff study, “Euro Area Policies,” suggests. Relative to a no-Brexit baseline, the GDP of the EU27 (EU member countries remaining after a UK exit) would fall long term by up to 0.8 percent if Brexit were followed by a standard free trade agreement. The decline would be 1.5 percent if there were a default to World Trade Organization rules. Importantly, the precise impact will depend on the outcome of ongoing negotiations and will vary widely across countries. Considering only the trade channel, long-term output losses would be particularly significant for Ireland, Belgium, and the Netherlands.

Structural Reforms and Resilience in Europe

Cross-country differences in economic resilience—in an economy’s ability to withstand and adjust to shocks—remain significant in the euro area. In part, the differences reflect the lack of a national nominal exchange rate as a mechanism to adjust to shocks. The IMF staff has argued that union-wide architectural changes such as the banking union, the capital markets union, and a central fiscal capacity can help foster greater international risk sharing. Yet even these changes cannot insure against all shocks. National policies thus have a vital role to play. An IMF staff discussion note analyzes how national structural policies can help euro area countries better deal with economic shocks.

Using a mix of empirical and modeling approaches, the note finds that growth-enhancing reforms to labor and product market regulations, tailored to country-specific circumstances, would help individual euro area economies weather adverse shocks. Higher-quality insolvency regimes are associated with more efficient factor reallocation following a shock. The note also finds that structural and cyclical policies interact. Greater rigidities make economies more fragile, putting a higher burden on fiscal policy. This is especially true for members of a monetary union. Countries should build fiscal space in good times and tackle rigidities, reducing their need for countercyclical policies in bad times while making countercyclical policies more effective when deployed.

Trade Tensions, Global Value Chains, and Spillovers

Europe is deeply integrated into global value chains, both in and outside the region. Almost 70 percent of total European exports are linked to forward and backward supply chains , and the introduction of new tariffs or other trade barriers would impact European economies through these complex trade linkages.

An IMF study shows the importance of distinguishing between traditional gross export measures and value-added exports to gauge exposure to external trade shocks, as the difference between these two measures is significantly large in the case of Europe.

The study focuses on the example of European cars and car parts exported to the United States. Overall, these exports amount to 0.3 percent of EU GDP (Figure 1.7). If applicable tariffs were to increase by 25 percent, as threatened by the US authorities—and mapping the subsequent output losses through supply chains—the impact on the European Union would be some 0.1 percent of GDP, with the losses distributed across more European countries than the gross export data would suggest. The Czech Republic offers a good example of how the loss distribution differs using gross exports or value-added exports.

Although the country’s gross exports of cars and car parts to the United States are very small (the country does not even appear in Figure 1.7), after considering supply chain linkages the Czech Republic looks to be the EU country fourth most affected by US car tariffs (Figure 1.8). Stated simply, there is a lot of Czech value added buried within other EU countries’ car exports to the United States.

Figure 1.7

Car and car parts gross exporters to the US, 2017

Percent of GDP

Bar graph showing the percent of GDP from car and car parts gross exporters to the US
Sources: EORA database, UN COMTRADE, and IMF staff calculations.

Note: The scenario assumes a 25 percent tariff imposed on US imports of cars and car parts.

Figure 1.8

Distribution of loss from US tariffs on imports of cars and car parts

Percent of GDP

Bar graph showing the percent of GDP of distribution of loss from US tariffs on imports of cars and car parts
Sources: EORA database, UN COMTRADE, and IMF staff calculations.

Note: The scenario assumes a 25 percent tariff imposed on US imports of cars and car parts.

Middle East and North Africa

Textile market in Marrakesh, Morocco
Marrakesh, Morocco

Regional Highlights

Somalia Has Taken Another Important Step Toward Debt Relief

Creating opportunity for all

Following a “Call for Action” at the January 2018 Opportunity for All Conference in Marrakesh, the IMF launched a paper on inclusive growth, “Opportunity for All: Promoting Growth and Inclusiveness in the Middle East and North Africa” at the Arab Economic Forum in Beirut, Lebanon, in July 2018. The paper offers detailed advice on how policies can make growth more inclusive. It offers examples and lessons from reform across the region and prioritizes faster implementation of reforms in the areas of governance; competition, trade, and technology; social spending and fair taxation; and job creation.

Policymakers and private sector representatives at the launch saw the inclusive growth agenda as a potential blueprint for a new social contract for the region. This sentiment was echoed in subsequent two-day consultations with civil society organizations and journalists, who also called for a greater focus on these priority areas in IMF programs.

Boosting the financial inclusion of small and medium enterprises

More private sector jobs is a critical challenge in the Middle East and Central Asia, where millions of people join the labor force every year and unemployment is already high. This effort should build on the development of a vibrant small and medium enterprise sector, in particular through better access to finance.

In February 2019, the IMF presented a paper titled “Financial Inclusion of Small and Medium-Sized Enterprises in the Middle East and Central Asia” at the American University in Cairo. It shows that scaling up their access to finance could bring about substantial macroeconomic benefits in the region—and potentially add 15 million new jobs by 2025.

Somalia: A road to stability

Since the IMF recognized the Federal Government of Somalia in 2013, IMF engagement—through policy advice and technical assistance—has helped Somalia on the road to economic stability following decades-long civil war. Though much work remains, Somalia has made significant progress through the successful completion of three successive staff-monitored programs. The IMF Executive Board endorsed the successor staff-monitored program (in July 2019) as meeting the conditionality standard of an upper-credit tranche arrangement, putting Somalia more clearly on the path toward debt relief under the Heavily Indebted Poor Countries Initiative. Somalia is expected to remain one of the largest beneficiaries of IMF technical assistance in the period ahead.

2021 Annual Meetings

In April 2018, Marrakesh, Morocco, was announced as the host of the October 2021 Annual Meetings of the World Bank and the IMF. Preparations for the event have already begun in earnest, with a joint IMF–World Bank team visiting Morocco to discuss the Journey to Morocco with authorities.

Western Hemisphere

Aerial view of Ecaudor

Regional Highlights

Figure 1.9

Restoring sustainability

Fiscal deficit and external financing in Ecuador (percent of GDP)

Bar graph showing the fiscal deficit and external financing in Ecuador
Sources: Ecuador Central Bank, Ministry of Finance, and IMF staff calculations.


In March 2019, Ecuador and the IMF agreed to a three-year arrangement under the Extended Fund Facility amounting to $4.2 billion. The plan contains policies to foster growth and competitiveness, strengthen the institutional foundations of Ecuador’s dollarization, ensure debt sustainability, protect the poor, and bolster the fight against corruption. These steps aim to create a more dynamic and inclusive economy for the benefit of all Ecuadorians.

Brazil: Boom, Bust, and the Road to Recovery

Brazil is at a crossroads, emerging slowly from a historic recession that was preceded by a huge economic boom. The book Brazil: Boom, Bust, and the Road to Recovery provides an assessment of the Brazilian economy and discusses policies needed to boost productivity and revive growth. The book was launched in March 2019 in Rio de Janeiro and São Paulo and at the Wilson Center in Washington, DC.

Building Resilience to Disasters and Climate Change in the Caribbean

A High-Level Conference on Building Resilience to Disasters and Climate Change in the Caribbean, organized jointly by the IMF, the World Bank, and the Inter-American Development Bank, was held in Washington, DC, in November 2018.

The conference aimed to broaden the policy focus toward building ex ante resilience and identify reforms and tools to support this shift. Participants unanimously called for greater urgency in addressing climate change effects. Several challenges were highlighted, including capacity constraints, the high cost of climate-resilient infrastructure and insurance premiums to hedge disaster risks, limited donor financing for building ex ante resilience, the absence of adequate data for costing risks, and political economy factors in balancing high up-front costs against payoffs visible only in the long term. Participants expressed strong support for a “grand bargain” among key stakeholders that involves country-led efforts to restore fiscal sustainability while incorporating up-front costs of resilience investments and their longer-term benefits in macro-fiscal frameworks to catalyze international support. The conference informed the paper “Building Resilience in Small States Vulnerable to Natural Disasters,” discussed by the Board in May 2019.

High-Level Conference on Building Resilience to Disasters and Climate Change in the Caribbean organized by the IMF, World Bank, and Inter-American Development Bank