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Takeaways from the IMF-World Bank Meeting

The International Monetary Fund (IMF) and World Bank have recently wrapped up their week-long annual meetings with some interesting findings.
The International Monetary Fund (IMF) and World Bank have recently wrapped up their week-long annual meetings with some interesting findings. Held in Marrakech, Morocco, the meetings discussed a range of topics from debt and inflation to the growing wealth gap between rich and poor countries as well as efforts to tackle climate change. The IMF’s verdict is that the global recovery remains slow, with growing regional divergences and little margin for policy error. On growth, the IMF’s baseline forecast is for global economic growth to gradually slow down, moving from 3.5% last year to 3% this year and 2.9% next year, a 0.1% point downgrade from a previous 2024 estimate. While global inflation is forecast as steadily declining from its current rate of 6.9%, the IMF still predicts inflation to be high at 5.8% next year. In its three-chapter World Economic Outlook, the IMF concludes that monetary policy actions and frameworks are the key to keeping inflation expectations anchored. There was also a lot of discussion on the global debt squeeze, which showed advanced economies such as the U.S. and China with looming debts to pay. One particular chart highlighted that there is more than US$5.5 trillion of corporate debt due next year, globally In its Global Financial Stability Report, the IMF also warned that continued high interest rates will put pressure on some borrowers. The IMF predicts around 5% of banks globally are vulnerable to stress if those rates remain higher for longer, and a further 30% of banks would be vulnerable if the global economy enters a prolonged period of low growth and high inflation. The World Bank also unveiled its new vision and playbook for development which aims to “create a world free of poverty on a liveable planet.” As well as its mission to tackle climate change, the World Bank also endorsed new steps to allow the use of debt-like hybrid capital for lending. Specifically, the World Bank has adopted new tools that could provide $157 billion in additional lending capacity over the next 10 years, which includes the issuance of hybrid capital, a portfolio guarantee mechanism, and an adjusted loan-to-equity ratio. Renewable energy was also on the table, as the World Bank is exploring loan maturities of 35 to 40 years to help countries better navigate long-term social and human capital investments and investigating reduced rates to incentivise exiting from coal as part of energy transitions. All in all, while the numbers highlight a slowing global economy, growing debt and slow renewable energy transition, the IMF and the World Bank have thrown plenty of solutions on the table. Past performance is not a reliable indicator of future performance.
 

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