Conjoncture - 11 September 2018
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    Mauricio Macri’s government has pulled Argentina’s economy out of isolation. His policies enabled it to swing back into growth in 2017 and to consolidate the central bank’s foreign reserves thanks to the inflow of portfolio investment. Yet these policies also widened the current account deficit, increased the USD-denominated public debt and indirectly generated inflationary pressures. The Argentine government has had to call on the IMF to stabilise the exchange rate. The stabilisation policy will plunge the economy back into stagnation, with an economic cost for the local population due to a very restrictive monetary policy and more demanding fiscal consolidation efforts than the government initially envisioned in late 2017. Considering Argentina’s high foreign currency debt burden, the government faces a classic dilemma of needing to stabilise both the public debt and the external debt.
    Conjoncture - 05 July 2018
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    Major supply-side constraints and hiring difficulties emerged in late 2017. Though normal during phases of accelerating growth, they nonetheless caught our attention because other indicators are not showing the same degree of pressure. The output gap is a key cyclical indicator. As estimated today, it had not completely closed in 2017, and the low level of core inflation suggests it might have been even more negative. These trends raise the question of France’s position within the economic cycle. Based on our analysis, the French economy has moved out of the recovery phase and growth has peaked, although it is not showing the signs of overheating that typically mark the end-of-cycle period. The economy seems to be in the intermediary growth phase, during which the economy slows but continues to grow at a faster pace than the potential growth rate.
    Conjoncture - 07 May 2018
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    The CFA franc’s stability is a source of concern. The drop-off in oil prices has weakened one of the two CFA franc regions so much that fears of devaluation have emerged again. In the end, the status quo is bound to prevail. With IMF support, several countries have engaged in stabilisation programmes that are beginning to bear fruit. Liquidity indicators are still a far cry from the alert thresholds defined in the CFA monetary agreements, and the financial and inflationary effects of devaluation would be disastrous. Yet to sustain the currency peg, several major challenges lie ahead, not only for the West African Economic and Monetary Union (WAEMU), whose robust growth fuels macroeconomic imbalances, but also for the Central African Economic and Monetary Community (CEMAC), which is now paying a heavy price for its oil dependency.
    In the short term, the main risk for the Indonesian economy is a tightening of US monetary policy, which could place downward pressure on the rupiah. In the medium term, the country risks getting stuck in a “middle income trap”. The first risk is presumably small. Indonesia has consolidated its macroeconomic fundamentals over the past five years, and its external vulnerability has been sharply reduced. The second risk is higher. To transform itself into a high income country, Indonesia must follow South Korea’s growth model by developing its manufacturing sector. Yet the lack of infrastructure and a low-skilled population are hampering its development and its integration in global value chains. After President Widodo took power in 2014, numerous reforms have been launched. His re-election in 2019 would allow Indonesia to continue along this track.

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