Finance and Development, June 2021

JUNE 2021

A COVID-19 tantrum? P.24

Rohini Pande profiled P.34

	Citizenship
FINANCE AND DEVELOPMENT	for sale P.50

What Next For

Emerging

Markets?

I N T E R N A T I O N A L M O N E T A R Y F U N D

Contents

Emerging markets must reclaim their hard-won economic strength as they recover from the

31 pandemic.

WHAT NEXT FOR EMERGING MARKETS?

4 Miles to Go

Emerging markets must balance overcoming the pandemic, returning to more normal policies, and rebuilding their economies

Rupa Duttagupta and Ceyla Pazarbasioglu

10 Is the Emerging World Still Emerging?

Two decades on, the BRICs promise lingers

Jim O'Neill

12 End of the Line

A looming oil price super cycle will likely be the last

Rabah Arezki and Per Magnus Nysveen

16 Global Clout, Domestic Fragility

China's long-term success will depend primarily on addressing its internal challenges

David Dollar, Yiping Huang, and Yang Yao

20 Inequality in the Time of COVID-19

All metrics are not equal when it comes to assessing the pandemic's unequal effect

Francisco H. G. Ferreira

24 A COVID-19 Tantrum?

The Federal Reserve's post-pandemic stance will expose vulnerabilities in emerging markets with high private external debt

Şebnem Kalemli-Özcan

28 Emerging Markets in Flux

Mahmood Pradhan chats with Richard House and David Lubin on the outlook for this group of countries

31 From Stream to Flood

Streaming video offers emerging markets an avenue for content at home and around the world

Adam Behsudi

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FINANCE & DEVELOPMENT

A Quarterly Publication of the International Monetary Fund June 2021 | Volume 58 | Number 2

DEPARTMENTS

50

ALSO IN THIS ISSUE

40 Monetary Meld

A currency union encompassing all of West Africa promises benefits but faces a multitude of obstacles Eswar Prasad and Vera Songwe

44 Inequality Interest

Central banks should better communicate monetary policy's distributional effects

Nina Budina, Chiara Fratto, Deniz Igan, and Hélène Poirson

50 Citizenship for Sale

Programs that offer passports in return for investment have financial integrity risks that must be managed Francisca Fernando, Jonathan Pampolina, and Robin Sykes

53 What We Owe Each Other

We need a new social contract fit for the 21st century Minouche Shafik

58 Military Spending in the Post-Pandemic Era

Countries' efforts to secure a more peaceful world could have a positive economic effect Benedict Clements,

Sanjeev Gupta, and Saida Khamidova

44

34 People in Economics

Inclusive Innovator

Peter J. Walker profiles Yale's Rohini Pande, whose work focuses on how better institutions can make life fairer

38 In the Trenches

Putting People First

South Africa's longest-serving finance minister, Trevor Manuel, reflects on the country's lost decade

48 Back to Basics

Risk and Return: The Search for Yield

Low rates of return tempt investors to take risks, which can cause economic and financial instability Jay Surti

56 Picture This

Jobs Dilemma

Creating sufficient employment in emerging market economies will require a big boost to economic growth

63 Book Reviews

The Spirit of Green: The Economics of Collisions and Contagions in a Crowded World, William D. Nordhaus

Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages, Michael Keen and Joel Slemrod

The Profit Paradox: How Thriving Firms Threaten the Future of Work, Jan Eeckhout

34

June 2021 | FINANCE & DEVELOPMENT 1

EDITOR'S LETTER

The Next Move

WE FOCUS THIS ISSUE on the road ahead for emerging markets, a label frequently applied to economies in the middle-neither advanced nor low-income. Because of their growing systemic relevance, this group of countries helps anchor global stability. Yet, as we drill down and define their characteristics, we find a widely diverse set of economies of varying sizes and growth rates that face different prospects, priorities, and challenges.

Some, like China, have managed to emerge quickly from the present crisis. Others may struggle for years to deal with the pandemic's aftereffects.

Amid a multispeed economic recovery-including within countries and across sectors, age groups, genders, and skill levels-this issue explores several cross-cutting themes for emerging markets. The IMF's Rupa Duttagupta and Ceyla Pazarbasioglu take stock, with a focus on debt, economic policy trade-offs, and priorities for stronger growth. Two leading investors, Richard House and David Lubin, discuss how emerging market assets have fared during the pandemic and why they are unlikely to suffer systemic crises as in the 1980s and 1990s. Şebnem Kalemli-Özcan, in contrast, sees the potential for greater turbulence as US interest rates rise. Francisco Ferreira shows that the pandemic's effect on inequality is manifested in counterintuitive ways, depending on how you measure it. And 20 years after coining the acronym "BRICs," Jim O'Neill reconsiders the diverging fortunes of Brazil, Russia, India, and China.

While this crisis will leave scars, it would be inaccurate to see only adversity ahead. Emerging markets can not only reclaim their hard-won economic gains, they can do even better than before the pandemic. This will require well-calibrated economic policies and strategies that improve access to health care and education, support and retrain displaced workers, and strengthen public investment in green projects and digital infrastructure. The goal is to build more inclusive economies that benefit everyone, while ensuring macroeconomic stability.

As in a chess game, every move by leaders and policymakers has con- sequences. Let them be the right ones.

GITA BHATT, editor-in-chief

ON THE COVER

Our June cover by Daniel Garcia Art depicts emerging markets' struggle with COVID-19, market turbulence, and the specter of mounting debt as a chess game. Just as pawns can be "promoted" with the right moves, these countries can overcome challenges with the right policies.

FINANCE & DEVELOPMENT

A Quarterly Publication of the

International Monetary Fund

EDITOR-IN-CHIEF:

Gita Bhatt

MANAGING EDITOR:

Maureen Burke

SENIOR EDITORS:

Andreas Adriano

Analisa Bala

Adam Behsudi

Peter Walker

DIGITAL EDITOR:

Rahim Kanani

ONLINE EDITOR:

Lijun Li

PRODUCTION MANAGER:

Melinda Weir

COPY EDITOR:

Lucy Morales

ADVISORS TO THE EDITOR:
Bernardin Akitoby	Mame Astou Diouf
Celine Allard	Rupa Duttagupta
Steven Barnett	Deniz Igan
Nicoletta Batini	Christian Mumssen
Helge Berger	İnci Ötker
Paul Cashin	Catriona Purfield
Martin Čihák	Mahvash Qureshi
Alfredo Cuevas	Uma Ramakrishnan
Era Dabla-Norris

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