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The Global and Regional Outlook. Task Force on Economic Challenges’ Meeting 8 December 2008. Olaf Unteroberdoerster Resident Representative, Hong Kong SAR, International Monetary Fund. The global economy is set for a major downturn. Despite aggressive policies to stabilize markets….

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The global and regional outlook

The Global and Regional Outlook

Task Force on Economic Challenges’ Meeting

8 December 2008

Olaf Unteroberdoerster

Resident Representative, Hong Kong SAR, International Monetary Fund







The u s recession is going to be more severe than in 1991
The U.S. recession is going to be more raising the specter of deflationsevere than in 1991


However large risks to the forecast
However, large risks to the forecast… raising the specter of deflation





What does this mean for asia growth to slow sharply next year
What does this mean for Asia? stressGrowth to slow sharply next year…




The forecasts assume smaller export and domestic demand slowdowns than in previous crises
The forecasts assume smaller export and domestic demand slowdowns than in previous crises…





Some countries may be more vulnerable than others
Some countries may be more vulnerable than others pressures on corporate Asia

  • Vulnerability factors differ across countries and include:

    • Current account deficits

    • Reliance on wholesale funding, including by banks

    • Significant foreign participation in domestic equity and bond markets

    • Corporate stress from sudden stops in financing

    • Domestic macro imbalances

    • Property sector booms

    • Lower commodity prices


Policies needed to support corporate sector and aggregate demand
Policies needed to support corporate sector and aggregate demand...

  • In many cases, room to ease monetary and fiscal policy further to address downside risks to growth

  • Need for public recapitalization of banks cannot be excluded.

  • Action is needed to guarantee trade financing

  • Direct support to corporates may be required if banks do not resume lending

    • Aim to minimize distortions

    • Formulate exit strategies


Longer term challenge a new financial architecture
Longer term challenge: a new financial architecture... demand...

  • The G-20 Summit on Financial Markets and the World Economy focused on reforms needed to address the weaknesses exposed by the financial crisis

  • Priorities for reform include:

    • strengthening transparency and accountability

    • enhancing sound regulation

    • promoting integrity in financial markets

    • reinforcing international cooperation, and

    • reforming international financial institutions


And a new role for the imf
...and a new role for the IMF demand...

  • Enhancing the resources of the Fund in line with increasing private sector flows

    • G-20 summit agreed to review the adequacy of resources

    • Resources could be increased by large Fund quota increase, in tandem with increasing voice of emerging markets and developing countries

  • The Fund, along with an expanded FSF, should identify vulnerabilities and provide early warnings, and develop recommendations to mitigate pro-cyclicality

    • All G20 members to undertake FSAPs


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