Emerging Markets Resilience in a New World

Emerging Markets: Resilience in a New World

Location: Meeting Halls A&B, HQ1-3-430A&B

Emerging market economies have continued to weather well several external shocks over the past year, including rising economic nationalism and waning support for global trade in advanced economies. But these economies are likely to face significant challenges going forward. In particular, while prospects for reflation in advanced economies, including through fiscal stimulus in the United States, could provide some support for the global economy in the short run, tighter U.S. monetary policy, a stronger U.S. dollar, heightened uncertainty and volatility in the euro area, a rise in economic nationalism and trade protectionism, and a rollback of financial regulation could cloud the medium-term growth outlook for emerging market economies. The seminar brings together policymakers to discuss the implications of these economic challenges for emerging markets economies.

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Moderator

Mark Schieritz, Economics Correspondent, Die Zeit

Mark Schieritz is the economics correspondent of the German weekly newspaper DIE ZEIT. He is based in Berlin and covers national and international economic affairs and has written extensively about the global economic architecture, monetary and fiscal policy and regulatory issues. Before joining DIE ZEIT, he was finance editor at the Financial Times Deutschland in Frankfurt. Mark Schieritz has won numerous awards for his reporting and frequently appears as a commentator in national radio and television programs. He holds a degree from the London School of Economics. He has written two books and occasionally contributes to academic journals.

Panelists

Tao Zhang, Deputy Managing Director, IMF

Tao Zhang is Deputy Managing Director of the IMF. He was Deputy Governor of the People's Bank of China (PBOC) prior to joining the Fund. Over the course of his career, he has held various senior positions at the PBOC, including as Director General of the Legal Affairs Department, Director General of the Department of Financial Survey and Statistics, and Director General of the International Department. He also served as Executive Director for China at the IMF.

Sri Mulyani Indrawati, Minister of Finance, Indonesia

Sri Mulyani Indrawati has been Indonesia’s Minister of Finance since 2016. Previously, Sri Mulyani was Managing Director and Chief Operating Officer of the World Bank from 2010–16, and also served as Executive Director of the IMF from 2002–05. She was Indonesia’s Minister of Finance from 2005–10. Sri Mulyani is currently the Chair of the Development Committee of the IMF-World Bank Annual Meetings. Sri Mulyani has a Ph.D. in Economics from the University of Illinois.

Ksenia Yudaeva, First Deputy Governor, Central Bank of Russia

Ms. Ksenia Yudaeva is the First Deputy Governor of Bank of Russia since September 2013 and a member of the Bank of Russia Board of Directors since 18 October 2013. Before this, she was the Chief of the Experts’ Directorate to the Presidential Administration in Moscow from 2012 to 2013. Prior to this, she worked at the Sberbank Centre for Macroeconomic Researches in Moscow as Director, Chief economist and senior advisor to the President from 2008 to 2012.

Ms. Yudaeva was awarded the Order of Honour, and commendation of the President of the Russian Federation. She holds a Ph.D. in Economics from the Massachusetts Institute of Technology and graduated from the M.V. Lomonosov Moscow State University in 1992.

Mauricio Cárdena, Minister of Finance and Public Credit, Republic of Colombia

Mauricio Cárdenas has been the Minister of Finance and Public Credit of Colombia since September 2012. He has been Minister of Mines and Energy, Minister of Economic Development, Minister of Transport and Director of the National Planning Department. He has also been the Manager of Bogota’s Energy Company and Director of the Latin American Initiative at the Brookings Institution. Minister Cardenas studied economics at the Universidad del los Andes and has a Ph.D. in Economics from UC Berkeley.

Emerging Markets: Resilience in a New World

Contributor: Marushia Gislén, Secretary’s Department

The seminar focused on key challenges for emerging markets in the light of rising economic nationalism and waning support for global trade in advanced economies, heightened uncertainty in the euro area, and tightening global financing conditions.

Key Points:

- Protectionism. Indrawati noted that many EMs have been able to transition from low to middle-income status by integrating into the global economy. She highlighted that the challenge for policy makers is to show that growth is not a zero-sum game. Cárdenas commented that policy makers should avoid overemphasizing the importance of bilateral trade imbalances, and rather focus on sound macroeconomic management and encourage inclusive global growth.

- Financial conditions. Indrawati and Yudaeva noted that reforms to date in EMs have made them better equipped to deal with tightening global financing conditions and market volatility. They also highlighted that increased clarity and consistency of interest rate decisions by the Federal Reserve has made market reactions more predictable. However, Yudaeva emphasized that challenges remain in countries that still have weak macroeconomic fundamentals, and that EMs need to prioritize addressing domestic vulnerabilities to mitigate the impact of market uncertainty.

- International taxation. Speakers noted that there is scope for deeper international cooperation on tax regulation. When asked about the impact of proposed tax reforms in the United States, Cárdenas underscored that there are great risks associated with individual countries starting to lower corporate tax rates, and if there is no coordination, everyone will be worse off.

- International cooperation. Panelists emphasized that multilateral cooperation and coordination are as important as ever. Regarding financial regulation, Cárdenas said that global coordination is crucial. Given the choice between lower cost of capital and a stronger regulatory framework, he would choose the latter if it could prevent another global economic crisis. Yudaeva pointed out that international regulatory coordination has been a costly process, and that the benefits are only now being noted. Prematurely scaling back this progress would imply additional costs in the long run. Indrawati underscored that while it might be hard for politicians in some countries to make the case for greater international cooperation, this is a critical task for the IMF and the World Bank Group.

- Strengthening resilience. Zhang emphasized that EMs need to continue focusing on domestic policies to enhance resilience. Indrawati encouraged a focus on understanding the output gap, investing in infrastructure, and improving human capital. Cárdenas said that resilience is about having a strong macroeconomic framework: fiscal rules, a flexible exchange rate, and inflation targeting. He also underscored the importance of a growing middle class.

Quotes:

“We need to avoid a race to the bottom in financial regulation, even at a higher cost of capital.” Mauricio Cárdenas, Minister of Finance, Colombia

“In 2008, there was a strong message that we are not going to repeat the mistakes of the 1930s when every country just stuck to protectionism...it is worth reminding ourselves of why we need international cooperation.” Ksenia Yudaeva, First Deputy Governor of the Bank of Russia

“We have to fight the idea that relationships between countries is a zero-sum game, because if we continue following that idea, there is a war that is going to happen.” Sri Mulyani Indrawati, Minister of Finance, Indonesia

“We are living in an integrated world, and no change in sentiment will change that. With the advance of technology, we will become even more integrated and the need for international cooperation will become more pressing.” Tao Zhang, IMF Deputy Managing Director