Entries for 2020

The fixed exchange rate was not adequately supported by other policies. Loose fiscal policy pushed public debt to unsustainable levels, while a slowdown of capital inflows, corruption, and regional conflicts weakened economic prospects. A viable economic program with international financing is key. 

Driven mainly by government borrowing, the debt to GDP ratio in frontier markets hit a fresh all-time high of 114% in Q3 2019, with total debt nearing $3.2 trillion, up by nearly $75 billion in the first three quarters of 2019. 

Economic sanctions are a form of government market intervention and can have significant unintended and uncertain consequences—particularly if they are placed on an economy highly integrated into the global economy and the international financial system. In this respect, the measures taken by the United States and its allies against Russia beginning in 2014 represented a paradigm shift.

As part of our new line of sustainability-themed research, we are launching a series of short "back-to-basics" notes, aiming to bring some clarity to the complex ecosystem of climate data, risk assessment methodologies, taxonomy and reporting. Our Sustainable Finance Pyramid sets out a framework of "building blocks" for the assessment of climate-related risks—and opportunities.  This toolkit supports effective disclosure—vital for regulators, policymakers and investors. 

Daunting sums: $3.5 trillion of investments in climate finance needed annually until 2050 to limit warming to 1.5C; Climate finance flows on the rise: global annual investment in clean energy hits $360bn in 2019; IIF Sustainable Finance Pyramid Framework — how data, methodologies, taxonomy, and disclosure fit together; Sharp increase in green bond issuance in 2019 to $255bn; emerging market green bond issuance hits a new high; The corporate sector has been the main driver of green bond volumes, as sovereign issuance remains lackluster
 

Sanctions on a highly-integrated economy such as Russia are still unprecedented. Unforeseen and unintended consequences could significantly shake up markets. The impact is likely most significant for asset managers and banking institutions. But further consequences for the underlying market infrastructure are possible.

Despite some fiscal consolidation, public finances are fragile. If fully implemented, the fiscal rule would imply a sizable adjustment. Nonetheless, gross public financing needs will likely remain high this year and next. 

The February U.S. Regulatory Update covers the Federal Reserve’s new proposed supervisory approach, the revised Volcker Rule covered funds proposal, the 2019 Financial Stability Oversight Council report, and more, along with Congressional updates and hearings summaries. 

The picture of China’s overseas direct investment (ODI) is quite different from many people’s impressions.