The May 2021 edition of the Insurance Update provides targeted updates on IIF insurance activities and events. 

We apply a Taylor Rule-based approach to policy making in the CEE-4 and find that rising inflationary pressures point to a need for rate hikes in three of the four countries: the Czech Republic, Hungary, and Poland. Closing output gaps also contribute, while lower real rates provide room.

China’s economic ties with Latin America grew at 19% compound annual rate over the past two decades thanks to China’s growing appetite for commodities. This note discusses the latest trade and investment developments since a detailed examination of data helps show the changing and nuanced picture.

A new report from the Institute of International Finance, the Financial Services Forum and the International Swaps and Derivatives Association examines several important issues related to the functioning of the financial markets – in particular, large global banks and dealers – during the COVID-19 pandemic.

Could a Chinese CBDC displace the dollar as the global reserve currency, undermine the U.S. sanctions regime or provide the Chinese government with the ability to increase surveillance on citizens?

A recent pickup in U.S. inflation has caused concerns among investors about EM. Inflation is above target in some key EMs and central banks are already cautious. At the same time, core inflation is still subdued compared to prior shock episodes. If U.S. yields continue to rise, EM bonds will likely come under further pressure. Among key EM, we are especially concerned about Brazil, South Africa, and Turkey.

Rapid vaccination and soaring copper prices bode well for a strong recovery. However, high caseloads have prompted renewed mobility restrictions. While a robust policy framework has allowed for sustained policy support, ongoing political changes could result in an expanded state footprint. 

IMF support to Sub-Saharan African countries reached unprecedented levels in 2020. Short-term instruments with limited conditionality accounted for most of the funding. Additional financing will likely be needed to support a robust recovery from COVID-19. In particular, multi-year arrangements could help anchor needed fiscal consolidation. The allocation and possible reallocation of SDRs could be very beneficial for the region.

The May 2021 Global Regulatory Update provides updates on current work streams. 

The vaccine program, strengthening of energy prices, and end of the rift with other GCC countries will support the recovery in Qatar. We expect the current account and fiscal balances to shift to sizeable surpluses in 2021 and 2022. 

Total global debt fell by $1.7 trillion to $289 trillion ($221 trillion ex-financials) in Q1 2021–nearly all in mature markets

In Peru, the upcoming runoff could result in a radical policy shift to the left, weighing on the currency despite a strong growth rebound and high copper prices. In Colombia, an ambitious fiscal reform has triggered protests and social unrest, which makes keeping investment-grade status less likely. 

The COVID-19-induced collapse in international tourism was unprecedented. Even in an optimistic scenario, tourism revenues will remain subdued in 2021. As a result, the economic recovery in countries such as Thailand will be slower. Furthermore, external pressures are set to rise as imports rebound strongly.