2024 IMF Annual Meeting

Last week I attended the latest Annual Meeting of the International Monetary Fund (IMF) in Washington.  It’s an important event in the international financial calendar, bringing together leaders from central banks, finance ministries and regulators from across the world to discuss key economic and financial issues. As a small open economy with a large financial system, the global context is especially relevant for Ireland.  

The latest meeting took place against the backdrop of a global economy that is moving closer to a soft landing.  Overall, economic activity has proven resilient, with global growth holding steady and inflation continuing to moderate. The IMF’s latest projections for continued global growth remain broadly unchanged since the Spring Meetings, with some country-level revisions. Disinflation is expected to continue over this year and next, although services inflation remains elevated in many regions.

However, growth prospects over the medium-term horizon are weak, due to a challenging combination of low-growth and high debt, as well as increasing geoeconomic fragmentation. This was a key theme of the IMF Managing Director Kristalina Georgieva’s opening remarks, and something that its First Deputy Managing Director, Gita Gopinath, discussed during her recent Whitaker lecture (PDF 1.84MB) here at the Central Bank.  Not surprisingly, the IMF’s Global Financial Stability Report concludes that, while near-term financial stability risks remain contained, mounting vulnerabilities could worsen future downside risks.

Against this backdrop, some of the key themes that were discussed last week included:

• A major milestone has been reached with the global decline in inflation, but downside risks are rising and now dominate the outlook. With the return of inflation near central bank targets, central banks in advanced economies have started to cut their policy rates, moving their policy stance towards neutral.
• Continued close monitoring of risks in the financial sector is required, both for banks and for non-banks. Efforts should continue to enhance financial regulation and supervision, including through the finalisation and implementation of internationally agreed financial sector reforms – recognising that without financial stability we cannot sustainably achieve economic growth.
• Innovation in payments was an important theme throughout the week. Discussions  focused on how progress in this area could improve the efficiency of financial markets, as well as considering the governance and oversight approaches for this fast evolving area.
• With an expected increase in financing demands arising from the green and digital transitions, the importance of progressing Europe’s Capital Markets Union from a structural, regulatory and supervisory perspective was a regular discussion topic.
• In the face of high and rising global public debt, there was broad recognition that fiscal policy should pivot towards consolidation, to ensure debt sustainability and a rebuilding of buffers.
• Fiscal policy and structural reforms should be aimed at making economies more productive, competitive and resilient. In this regard, the IMF’s World Economic Outlook considered strategies to enhance the social acceptability of these needed reforms (a key requirement for their successful implementation).
• The implications of increased global fragmentation was an important consideration in many of the policy discussions throughout the week (and the IMFC Chair’s Statement  recognised the importance of international cooperation for improving the resilience of the global economy). 

Non-banks

The Central Bank’s work on the role that non-banks play in the financial system, and our policy measures and thinking around how the policy framework needs to evolve, was also of considerable interest to the IMF and others last week. This included the important role Ireland and its international financial sector plays in delivering global financial stability as a global good.

The funds sector has undergone significant growth over the last decade, and its interconnectedness to the wider financial system and to the real economy has deepened considerably.  This interconnection, including interconnections between non-banks and banks, is increasingly a focus at international level.

The aim of our macroprudential policy for the sector is to ensure that, as it continues to grow, it also builds the necessary resilience so that it is less likely to amplify adverse shocks. International coordination and cooperation is important given the inherently global nature of the sector.

Conclusion

Finally, last week’s meeting took place 80 years after the 1944 Bretton Woods Conference which led to the creation of the IMF (and the World Bank).  The world today looks very different from that time but the ideals that the representatives of the initial 44 countries sought to establish – a framework for economic cooperation and development that would lead to a more stable and prosperous global economy – continue to remain central today as we welcomed the IMF’s 191^st member country.

The first Irish delegation to attend the IMF’s Annual Meeting was led by Ken Whitaker in 1957.  Like many other countries, Ireland has benefitted enormously from its membership.  With global fragmentation risks on the rise, it is important that we remain proactive in our advocacy for multilateralism and the interconnections enabled by the IMF and other international institutions.

Gabriel Makhlouf

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