IMF report urges G20 to prepare global economic stimulus plan

Short notes taken from Reuters:

  • The G20 must plan now for coordinated demand support using available fiscal space to boost public investment. Global economic growth was slowing and financial conditions were tightening for emerging economies, where commodity exporters have been hard hit by an economic slowdown in China. These developments point to higher risks of a derailed recovery.
  • Governments around the world may need to create new financing mechanisms to help some emerging market and commodity exporting countries that are highly vulnerable to reversals in the flows of money.
  • The IMF will conduct a review this year of how countries should manage capital flows and will focus its attention on the sources of capital and where the funds are allocated. Investor cash rushed out of poorer or underperforming economies and into the United States in the run-up to the U.S. Federal Reserve’s interest rate hike in December, which ended seven years of near-zero rates. That weakened emerging market currencies, making their exports more expensive at a time when global demand for commodities had also fallen.
  • In January, the IMF cut its forecast for 2016 global economic growth to 3.4 percent from 3.6 percent. The staff report on Wednesday said another downgrade was likely in April. Advanced economies should rely less on monetary policy and more on fiscal policy to support economic growth. Emerging market economies should adopt flexible exchange rates when feasible and use foreign exchange interventions only on a temporary basis.

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