By Giovanni Ganelli, Pau Rabanal and Niamh Sheridan

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The war in Ukraine and resulting increase in commodity prices are expected to contribute to a further widening this year.

The lingering pandemic and Russia’s invasion of Ukraine are dealing a setback to the global economy. This is affecting trade, commodity prices, and financial flows, all of which are changing current account deficits and surpluses.

Global current account balances—the overall size of deficits and surpluses across countries—are widening for a second straight year, according to our latest External Sector Report. After years of narrowing, balances widened to 3 percent of global gross domestic product in 2020, grew further to 3.5 percent last year, and are expected to expand again this year.

Larger current account balances aren’t necessarily negative on their own. But global excess balances—the portion not...

Global current account balances—the overall size of current account deficits and surpluses—continued to widen in 2021 to 3.5 percent of world GDP, and are expected to widen again this year. The IMF’s multilateral approach suggests that global excess balances narrowed to 0.9 percent of world GDP in 2021 compared with 1.2 percent of world GDP in 2020.

The pandemic has continued to affect economies’ current account balances unevenly through the travel and transportation sectors as well as a shift from services to goods consumption. Commodity prices recovered from the COVID-19 shock and started rising in 2021 with opposite effects on the external position of exporters and importers, a trend that the war in Ukraine is exacerbating in 2022.

The medium-term outlook for global current account balances is a gradual narrowing as the impact of the pandemic fades away, commodity prices normalize, and fiscal consolidation in current account deficit economies progresses....

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Innovation has brought us to an inflection point; the coming decade will be decisive

When we gathered in Paris in 2015 to hammer out the historic climate deal, few of us dared hope that by 2021 more than 60 countries—representing over half of global emissions—would have committed to net zero emissions by mid-century. In addition, 4,500 non-state actors, such as companies, cities, regions, and other institutions, have embraced a net zero target. Asset owners and managers are also now stepping up, with over $40 trillion of assets under management committed to net zero portfolios by 2050.

What has brought us to this inflection point of hope edging out despair?

Innovation—in institutions, understanding, technology, and leadership. The Paris deal itself was hugely innovative. Politics ruled out a legally binding treaty, so a new approach had to be forged. Fiercely criticized by some for its voluntary nature and non-binding...

Asia alone has roughly two billion internet users, with considerable room to grow. Asia’s advanced and emerging market economies have several locally headquartered tech giants—including Alibaba, JD.com, Tencent, Rakuten—and host foreign tech giants such as Facebook. A new set of agreed global tax reforms will change where these tech giants and other global giants pay taxes.

Thus far, it’s been challenging for many Asian countries to tax tech giants especially because many are not physically but rather only digitally present in a country. Existing international norms for taxing profits, which many people consider to be outdated and unfair, haven’t kept up. Collecting taxes on cross-border digital services and small parcel e-commerce deliveries is also a challenge.

Changes afoot

Some Asian countries have started to introduce digital services taxes—withholding taxes on payments for cross-border digital services or user-based turnover taxes on digital...

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Finland and Dominica pursue innovative ways of coping with climate change

The devastating scenes of destruction that have played out in recent weeks—from record-breaking floods in China to raging fires in Greece—offer a glimpse into what a warmer world looks like. Climate chaos is not inevitable, however. Climate solutions exist, and they are being delivered in countries with the will and leadership to do so.

The countries highlighted here have different goals. In Finland, it’s mitigation. The country has set an ambitious target of becoming carbon neutral by 2035, in part by shifting from plastic, concrete, and steel to wood and bio-based materials through careful forest management.

In Dominica, a Caribbean island on the front lines of the war on climate change, adaptation is the priority. Storms regularly batter the island and climate change will inevitably increase both the frequency and intensity of those storms. The country...

Asia alone has roughly two billion internet users, with considerable room to grow. Asia’s advanced and emerging market economies have several locally headquartered tech giants—including Alibaba, JD.com, Tencent, Rakuten—and host foreign tech giants such as Facebook. A new set of agreed global tax reforms will change where these tech giants and other global giants pay taxes.

Thus far, it’s been challenging for many Asian countries to tax tech giants especially because many are not physically but rather only digitally present in a country. Existing international norms for taxing profits, which many people consider to be outdated and unfair, haven’t kept up. Collecting taxes on cross-border digital services and small parcel e-commerce deliveries is also a challenge.

Changes afoot

Some Asian countries have started to introduce digital services taxes—withholding taxes on payments for cross-border digital services or user-based turnover taxes on digital...

The Civil Society Policy Forum (CSPF) has become an integral part of the International Monetary Fund and World Bank Group Spring and Annual Meetings, providing an open space for Civil Society Organizations (CSOs) to dialogue and exchange views with World Bank Group and IMF staff, their peers, government delegations, and other stakeholders on a wide range of topics.

Find a tentative schedule for the CSPF.

To attend the CSPF, we invite civil society organizations to register for the Annual Meetings.

CSOs include non-governmental organizations, community groups, labor unions, indigenous peoples movements, faith-based organizations, professional associations, foundations, think tanks, charitable organizations, and other not-for-profit organizations.  Representatives from the private sector, academia or governmental bodies must apply for accreditation through the "Guests" or other respective registration category as clarified on the...

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The 2021 IMF Youth Fellowship Program provides an opportunity for young participants to become part of the global effort to build forward better and join the IMF at the forefront of the response to the crisis. Participants in the program will experience firsthand the IMF virtual Annual Meetings and participate in virtual training led by IMF experts. Selected fellows will get the opportunity to participate in a 2-day virtual workshop to meet with IMF management and senior staff and discuss current global economic issues including inclusive growth, inequality, digital economy and climate change.

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Finland and Dominica pursue innovative ways of coping with climate change

The devastating scenes of destruction that have played out in recent weeks—from record-breaking floods in China to raging fires in Greece—offer a glimpse into what a warmer world looks like. Climate chaos is not inevitable, however. Climate solutions exist, and they are being delivered in countries with the will and leadership to do so.

The countries highlighted here have different goals. In Finland, it’s mitigation. The country has set an ambitious target of becoming carbon neutral by 2035, in part by shifting from plastic, concrete, and steel to wood and bio-based materials through careful forest management.

In Dominica, a Caribbean island on the front lines of the war on climate change, adaptation is the priority. Storms regularly batter the island and climate change will inevitably increase both the frequency and intensity of those storms. The country...

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Good economics demands that we manage Nature better

The past 70 years are a success story on many counts. We are healthier, live longer, and enjoy higher income, on average, than our predecessors. The proportion of the world’s population in absolute poverty has fallen dramatically. As we benefit from advances in technology, modern science, and food production, we may be excused for thinking that humanity never had it so good. Global GDP has risen enormously since the 1950s (see chart), and world economic output is 15 times higher.

These achievements conceal a simple truth, however, which has profound consequences not only for how we think about and practice economics, but also for the way we live our lives. All the prosperity we have enjoyed relies on the Nature that surrounds us and of which we are a part—from the food we eat, to the air we breathe, to the decomposition of our waste, to opportunities for recreation and spiritual...

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Finland and Dominica pursue innovative ways of coping with climate change

The devastating scenes of destruction that have played out in recent weeks—from record-breaking floods in China to raging fires in Greece—offer a glimpse into what a warmer world looks like. Climate chaos is not inevitable, however. Climate solutions exist, and they are being delivered in countries with the will and leadership to do so.

The countries highlighted here have different goals. In Finland, it’s mitigation. The country has set an ambitious target of becoming carbon neutral by 2035, in part by shifting from plastic, concrete, and steel to wood and bio-based materials through careful forest management.

In Dominica, a Caribbean island on the front lines of the war on climate change, adaptation is the priority. Storms regularly batter the island and climate change will inevitably increase both the frequency and intensity of those storms. The country...

Brazil’s Ilan Goldfajn explains why central bankers ought to follow their convictions

Andreas Adriano

Central banks should never surprise markets, so goes the cliché. But Ilan Goldfajn knows that sometimes that is exactly what is needed. In mid-2016, during his first two weeks as governor of Brazil’s central bank, markets, journalists, and commentators all believed that the country’s inflation-targeting regime would have to be adjusted, because inflation was too high. Goldfajn disagreed and stood his ground. Inflation in 2017 was 2.95 percent, almost below the tolerance margin.

Born in Israel, Goldfajn grew up in Rio de Janeiro during a time of profound economic disarray in Brazil, witnessing four currency changes in seven years and inflation upward of 80 percent a month. He earned a PhD from the Massachusetts Institute of Technology and worked with Asian countries at the IMF during the late 1990s. He was deputy governor for economic policy at...

September 14, 2021

Digitalization in Asia is pervasive, unique, and growing. It stands out by its sheer scale, with internet users far exceeding numbers in other regions. Yet, digitalization also raises new tax challenges. Existing income tax systems are widely perceived as unfair as they fail to assign taxing rights to countries where non-resident businesses make e-commerce sales or where online users are located.

Global tax reforms currently under consideration under the OECD-led Inclusive Framework will likely change the geographic distribution of tax revenue paid by multinational enterprises in Asia, creating winners and losers. Unilateral measures, such as digital services taxes, have been introduced by many countries in the region, but create tradeoffs, and potential revenues remain limited. Finally, a key question for indirect taxes is not “what” to tax, but “who” will collect the tax.

Against this backdrop, this high-level virtual seminar will...

Overall current account deficits and surpluses widened in 2020 to 3.2 percent of world GDP. The IMF’s multilateral approach suggests that global excessive imbalances were broadly unchanged in 2020 at about 1.2 percent of world GDP. The external outlook for 2021 is highly uncertain given the divergent economic prospects across countries.

Unprecedented government borrowing to finance health care and economic support has had uneven effects on current account balances. The impact on the current account balances depends on a country’s relative fiscal policy stance compared with that of its trading partners.

The outlook for global current account balances is a gradual narrowing during 2022–26, mainly reflecting a narrowing of the US deficit and China’s surplus to below pre-pandemic levels. Over the medium term, collective action is needed to reduce global imbalances in a growth-friendly manner.

Special Drawing Rights (SDR) are international reserve assets and used as the accounting unit for IMF transactions with its member countries. Earlier this month, in a historic multilateral response to the pandemic, the IMF board of governors approved a new SDR allocation of $650 billion, the largest in the institution's history. Ceyla Pazarbasioglu heads the Strategy, Policy and Review Department at the IMF. In this podcast, she says the SDR allocation will go a long way toward helping vulnerable countries and minimize the dangerous divergence in recovery paths around the world. TRANSCRIPT: https://bit.ly/3y6inY1