Global | The IMF in a world of the lesser of two evils

Summary

The meetings of the International Monetary Fund (IMF) are useful to gauge the health of the economy and analyze the challenges it faces. The snapshot this year has been upbeat since global growth forecasts have been revised up and the IMF has attached less importance to the myriad risks it had outlined.

Key points

• Key points:
• The negative message that resonated most is one of divergence: between geographies like the U.S. with risks to growth (and inflation) tilted to the upside and those of the rest of the world with downside risks, and between high prices for services and low prices for goods.
• It is also worth mentioning the growth divergence across regions: increasingly poor growth path expected in the long term due to demographic issues and low productivity, which only has a pulse in the United States.
• The IMF did not stress the price being paid for the balances of this new world on any of these issues: tax sustainability risks in the U.S., the distortions this is causing in other countries for their industrial policy, and how far the country is from deciding to lower tariffs placed on third countries and help rein in inflation.
• There are other risks that the IMF speaks about with less emphasis, despite having strong arguments to do so. There is no global governance in a world that trades and invests less and less outside the "friendly blocs". The World Trade Organization (WTO) and G20 are not taking steps to bring order to trade or limit protectionism.
• Perhaps the IMF has struggled to deliver a more balanced message highlighting the risks because it sees itself as the only multilateral institution where global issues are still discussed. It wants to be in the race to have a new role of monitoring industrial policies and measuring their impact alongside the WTO, to help steering the world towards following some type of rule-based system again.

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