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International Monetary Fund

Abstract

Executive Directors broadly agreed with the findings of the External Sector Report and its policy recommendations. They noted that global current account surpluses and deficits have remained broadly unchanged in recent years. At the same time, the concentration of excess imbalances in advanced economies has increased, on both the surplus and deficit sides, amid a widening of creditor and debtor positions. Directors noted with concern the projected continuation of this trend under baseline policies.

International Monetary Fund

Abstract

Executive Directors broadly agreed with the findings of the External Sector Report and its policy recommendations. They noted that global current account surpluses and deficits have remained broadly unchanged in recent years. At the same time, the concentration of excess imbalances in advanced economies has increased, on both the surplus and deficit sides, amid a widening of creditor and debtor positions. Directors noted with concern the projected continuation of this trend under baseline policies.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

Produced since 2012, the IMF’s annual External Sector Report analyzes global external developments and provides multilaterally consistent assessments of external positions, including current accounts, real exchange rates, external balance sheets, capital flows, and international reserves, of the world’s largest economies, representing over 90 percent of global GDP. Chapter 1 discusses the evolution of global external positions in 2020, external developments throughout the COVID-19 crisis, and policy priorities for reducing excess imbalances over the medium term. Chapter 2 analyzes how the unprecedented fiscal support provided in response to the COVID-19 crisis has affected external positions at the individual and global level. It also focuses on how withdrawal of such support will impact external positions in the medium term. Chapter 3, “Individual Economy Assessments,” provides details on the different aspects of the overall external assessment and associated policy recommendations for 30 economies. This year’s report and associated external assessments are based on the latest vintage of the External Balance Assessment (EBA) methodology and on data and IMF staff projections as of June 30, 2021.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

This overview chapter discusses the evolution of and outlook for global external positions and summarizes the IMF staff’s external assessments for a globally representative set of economies in 2019, which are also detailed in Chapter 3, “2019 Individual Economy Assessments. “ These assessments are multilaterally consistent and draw on the latest vintage of the External Balance Assessment (EBA) methodology and consider a full set of external indicators, including current accounts, exchange rates, external balance sheets, capital flows, and international reserves. The assessments’ objectives and concepts are summarized in Box 1.1. The chapter is organized as follows: the first section, “Global Imbalances before the COVID-19 Crisis,” documents the evolution of current accounts, exchange rates, and international trade in 2019. It also presents IMF staff external sector assessments for 2019, providing a benchmark for assessing external positions as they were before the onset of the COVID-19 pandemic. The second section, “External Developments during the COVID-19 Crisis,” discusses the evolution of exchange rates, international trade in goods and services, capital flows, and current account balances in 2020, drawing on both recent data and IMF staff forecasts. The third section, “Significant Risks to the External Outlook,” discusses the elevated uncertainties and risks currently pertaining to the outlook. The final section, “Policy Priorities,” discusses policy responses for addressing these risks and responding to the crisis as well as reforms to reduce excess imbalances over the medium term in a manner supportive of global growth.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

This overview chapter discusses the evolution of and outlook for global external positions and summarizes the IMF staff’s external assessments for a globally representative set of economies in 2019, which are also detailed in Chapter 3, “2019 Individual Economy Assessments. “ These assessments are multilaterally consistent and draw on the latest vintage of the External Balance Assessment (EBA) methodology and consider a full set of external indicators, including current accounts, exchange rates, external balance sheets, capital flows, and international reserves. The assessments’ objectives and concepts are summarized in Box 1.1. The chapter is organized as follows: the first section, “Global Imbalances before the COVID-19 Crisis,” documents the evolution of current accounts, exchange rates, and international trade in 2019. It also presents IMF staff external sector assessments for 2019, providing a benchmark for assessing external positions as they were before the onset of the COVID-19 pandemic. The second section, “External Developments during the COVID-19 Crisis,” discusses the evolution of exchange rates, international trade in goods and services, capital flows, and current account balances in 2020, drawing on both recent data and IMF staff forecasts. The third section, “Significant Risks to the External Outlook,” discusses the elevated uncertainties and risks currently pertaining to the outlook. The final section, “Policy Priorities,” discusses policy responses for addressing these risks and responding to the crisis as well as reforms to reduce excess imbalances over the medium term in a manner supportive of global growth.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

This overview chapter presents the evolution, outlook, and risks from global external positions and summarizes the external assessments of a globally representative set of economies for 2018, which are also detailed in Chapter 3, “2018 Individual Economy Assessments.” These assessments are multilaterally consistent and draw on inputs fom the latest vintage of the External Balance Assessment (EBA) methodology and consider a full set of external indicators, including current accounts, exchange rates, external balance sheets, capital flows, and international reserves. The chapter’s key objectives and concepts are summarized in Box 1.1

International Monetary Fund. Monetary and Capital Markets Department

Abstract

This overview chapter discusses the evolution of and outlook for global external positions and summarizes the IMF staff’s external assessments for a globally representative set of economies in 2019, which are also detailed in Chapter 3, “2019 Individual Economy Assessments. “ These assessments are multilaterally consistent and draw on the latest vintage of the External Balance Assessment (EBA) methodology and consider a full set of external indicators, including current accounts, exchange rates, external balance sheets, capital flows, and international reserves. The assessments’ objectives and concepts are summarized in Box 1.1. The chapter is organized as follows: the first section, “Global Imbalances before the COVID-19 Crisis,” documents the evolution of current accounts, exchange rates, and international trade in 2019. It also presents IMF staff external sector assessments for 2019, providing a benchmark for assessing external positions as they were before the onset of the COVID-19 pandemic. The second section, “External Developments during the COVID-19 Crisis,” discusses the evolution of exchange rates, international trade in goods and services, capital flows, and current account balances in 2020, drawing on both recent data and IMF staff forecasts. The third section, “Significant Risks to the External Outlook,” discusses the elevated uncertainties and risks currently pertaining to the outlook. The final section, “Policy Priorities,” discusses policy responses for addressing these risks and responding to the crisis as well as reforms to reduce excess imbalances over the medium term in a manner supportive of global growth.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

This overview chapter presents the evolution, outlook, and risks from global external positions and summarizes the external assessments of a globally representative set of economies for 2018, which are also detailed in Chapter 3, “2018 Individual Economy Assessments.” These assessments are multilaterally consistent and draw on inputs fom the latest vintage of the External Balance Assessment (EBA) methodology and consider a full set of external indicators, including current accounts, exchange rates, external balance sheets, capital flows, and international reserves. The chapter’s key objectives and concepts are summarized in Box 1.1

International Monetary Fund. Monetary and Capital Markets Department

Abstract

Produced since 2012, the IMF’s annual External Sector Report analyzes global external developments and provides multilaterally consistent assessments of external positions, including current accounts, real exchange rates, external balance sheets, capital flows, and international reserves, of the world’s largest economies, representing over 90 percent of global GDP. Chapter 1 discusses the evolution of global external positions in 2020, external developments throughout the COVID-19 crisis, and policy priorities for reducing excess imbalances over the medium term. Chapter 2 analyzes how the unprecedented fiscal support provided in response to the COVID-19 crisis has affected external positions at the individual and global level. It also focuses on how withdrawal of such support will impact external positions in the medium term. Chapter 3, “Individual Economy Assessments,” provides details on the different aspects of the overall external assessment and associated policy recommendations for 30 economies. This year’s report and associated external assessments are based on the latest vintage of the External Balance Assessment (EBA) methodology and on data and IMF staff projections as of June 30, 2021.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

There is an ongoing debate about the role of exchange rates in facilitating external adjustment. This chapter explores how certain aspects of international trade, namely dominant currency pricing and international integration through global value chains, shape the working of exchange rates to induce external adjustment. The analysis suggests that the widespread use of the US dollar in trade pricing alters the short-term response of trade flows to exchange rate movements, with export volumes responding timidly to an exchange rate depreciation, while most of the adjustment takes place through import volumes. A more balanced adjustment process, through both export and import volumes, reemerges over the medium term. Meanwhile, greater integration into global value chains reduces the exchange rate elasticity of gross trade volumes, both in the short and medium term, but the associated increase in gross trade flows largely offsets this effect in most cases. Overall, the results suggest that while these features of international trade affect the composition and timing of the external adjustment process, for most countries, there remain benefits of exchange rate flexibility, especially in the medium term. With more muted effects of exchange rates on trade flows in the short term, complementary policies may be needed in some cases to support exchange rate flexibility and facilitate external rebalancing.