INTERNATIONALMONETARYFUND EXTERNALSECTORREPORT Pandemic,War,and Globallmbalances 2022AR INTERNATIONALMONETARYFUND EXTERNALSECTORREPORT Pandemic,War,andGloballmbalances 2022 @2022IntermationalMonetaryFund Cataloging-in-PublicationData IMFLibrary NamesInternationalMonetaryFund,publisher. Tile:Extermalsectorreport(IntermationalMonetaryFund). Othertitles:ESR Description:Washington,D.C.:InternaxtionalMoetaryFund,2012-|Annual|Someisusalsohavethematic titles.|Beganin2012.|Includesbibliographicalreferences. Identifles:ISSN2617-3832(print)|ISSN2617-3840(online) Periodicals.|Internationalfinance—Periodicals. Clasification:LCCHG3882.158 ISBN:979-8-40021-494-3(Psper) (qra)9-055-zoo8-6L6 (d)0-8S-1z008-66 TheErneruelSeswRrper(ESR)isasurveybytheIMFstaffpublshedoncesyea,inthesummer. TheESRispreparedbytheIMFstaffandhasbenefitedfromcommentsandsuggestionsbyExecutive DirectorsfollowingtheirdiscusioenofthereportonJuly22,2022,Theviescapresedinthispub licationarethoseofcheIMFstaffanddonotnecessarilyrepresenttheviewsoftheIMF’sExecutive Directorsorcheirnationalauthorities. Recommendedcitation:InternationalMonetaryFund,2022.Ereraa/SecerRger:Rmdewi;Wler,end GlabalImkalamcexWashington,DC,August. Publicationondersmaybepacedonline,byfia,orthroughchemail: InternationalMonetaryFund,PublicationsServices IP:O.Box92780,Washington,DC20090,USA Tel:(202)623-7430Fer:(202)623-7201 E-mail:puMlicationiimforg www.boolstore.imf.org www.ellbraryimf.org CONTENTS FurtherInformatien vll Prefacevli ExecutiveSummary IMFExecutiveBoardDiscussionSummaryxi Chapter1.ExternalPositiensandPolicies1 WarandLingeringPandemic1 OutlookforCurrentAccountBalancesandRisks14 Box1.1,SavingandWealthDynamicsintheAftermathofCOVID-1919 Box1.2.CurrentAccountRebalancing;ArWhatSpeed?AsessmentofCurrentAccount GapsHistoricalPersistence23 Box1.3.ExternalSectorImpactofDisasterShocks26 Box1.4.TheWorstofBothWorlds:TradeRestrictionsHurtGrowthwithNoBenefitfor ExternalPositions28 References38 OnlineAnnex1.1.EBAMethodology2022Refinements OnlineAnnex1.2.COVID-19RelatedExternalBalanceAsessmentAdjustments Chapter2.ClimatePoliciesandExtemalAdjustment39 Introduction39 TheApproach:TheModel-BasedMitigationScenario41 ExternalSectorImpact44 AlternativeScenarios50 GlobalImplications53 Conclusion54 Box2.1.OilDiscoveriesandtheExternalSector56 Box2.2.UnderstandingtheCarbonTaxEfectsintheG-CubedModel57 Box2.3.TheGreenEnetgyTransitionandItsImpactonMetalMining59 References 61 Chapter3.2021IndividualEconomyAssessments63 MethodologyandProcess63 SelectionofEconomies63 Box3.1.AssessingImbalances:TheRoleofPolicies—AnExample64 AbbreviationsandAcronyms65 TechnicalEndnotesbyEconomy References99 Figures Figure1.1.TheCOVID-19CrisisandtheWarinUkraine2 Figure1.2.MovementsinOilTradeBalanceandCurrentAccountforOilExportersandImporters2 IntematienalMonetaryFund|2022 2022EXTERNALSECTORREPORT Figure1.3.CurrentAccountProjectionsfor2022beforeandaftertheWarinUkraine Figure1.4.HouseholdConsumptionCompositionShift,AEsandEMDEs,201921 Figure1.5.TradeinGoodsandServicesComparedwithPre-pandemicTrends Figure1.6.PrivateandPublicSectorSavingRatesinAdvancedEconomies Figure1.7,GlobalCurrentAccountBalances,19902027n Figure1.8.GlobalCurrentAccountBalancesandCOVID-19Factors7 Figure1.9.FiscalPolicyChanges,20192026 Figure1.10.CurrencyMovements 77 Figure1.11.EstimatedChangeinForeignExchangeReservesandNominalEffective ExchangeRateChange90 Figure1.12.CapitalFlowstoEmergingMarketandDevelopingEconomiesandtheVIX8 Figure1.13.NetInternationalInvestmentPositions,199020229 Figure1.14.EvolutionoftheGlobalFinancialSafetyNet,1995202111 Figure1.15.EvolutionofBilateralSwapLineNetworks,202111 Figure1.16.ExternalBalanceAssessmentCurrentAccountNorms,202112 Figure1.17.TheEvolutionofExternalSectorAssessments,20122112 Figure1.18.IMFStaffandExternalBalanceAssessmentCurrentAccountand RealExchangeRateGaps,202113 Figure1.19.EvolutionofHeadlineCurrentAccountBalancesandIMFStaffGaps13 Figure1.20.GlobalSaving-lnvestmentBalances,20202714 Figure1.21.NewTradeRestrictions,20092215 Figure1.22.China:MajorImportSources,20172116 Figure1.23,EmergingMarketandDevelopingEconomies:ExternalVulnerabilities17 19 Figure1.1.2.CumulativeChangeintheCurrentAccount20 Figure1.1.3.ChangeinFinancialWealth20 Figure1.1.4.UnitedStates:ChangeinHouseholdNetWealth,byWealthPercentile, COVID-19versusNormalTimes21 Figure1.1.5.Europe:UnequalDistributionofSaving,byIncomePercentile22 Figure1.2.1.IMFStaffandEBACAGapsAdjustment:Half-Lives24 Figure1.3.1.EffectsofaDisasterShockontheCurrentAccount26 Figure1.3.2.ImpactofNaturalDisaster27 Figure1.4.1.NontarffBarriersIndex28 Figure1.4.2.EffectofanIncreaseinNTBs29 Figure2.1.StructuralAsymmetries42 Figure2.2.PolicyPackage44 Figure2.3.ImpactofaCoordinatedCarbonTaxontheExternalSector45 Figure2.4.CountryCharacteristicsandExternalSectorImpactoftheCarbonTax47 Figure2.5.ImpactoftheGreenSubsidyontheExternalSector48 Figure2.6.CountryCharacteristicsandExternalSectorImpactoftheGreenSubsidy48 Figure2.7.ImpactofMitigationPolicyPackageontheExternalSector49 Figure2.8.ImpactofPar