10
More concerted efforts are needed to address labour market issues
World Economic Situation and Prospects 2014
such as Brazil and Mexico, unemployment remained at about 6 per cent or below. Labour market indicators are likely to remain solid over the remainder of the year for the region; however, there may be no further improvement in the near future, despite improvements in growth, due to the fact that unemployment growth is barely equal to the growth of the labour force for a number of countries. The unemployment rate remains at historical lows in the Russian Federation, between 5 and 6 per cent, despite a noticeable slowdown and in-migration from surrounding countries in the CIS. A number of countries are making concerted efforts at addressing labour market issues, such as aligning macroeconomic policies appropriately with domestic conditions, promoting training for youth and other excluded segments of the labour force, and taking steps to induce advances in productivity and innovation.4 The expectation is that these measures will be enacted through a coordinated and integrated policy framework that will balance labour demand and labour supply, with sufficient efforts to ensure sustainable social protection. This also includes promoting an environment that is conducive to job creation with access to finance, necessary infrastructure, and support for SMEs. Further steps to activate labour through skills training and upgrading will be necessary to integrate those groups that have been excluded or that have been forced to subsist through intermittent and vulnerable employment.
Trends in international finance and trade Capital inflows to emerging economies declining
QE is having a significant influence on the net capital inflows to emerging economies
Net private capital inflows to emerging markets, 5 a subgroup of developing countries, and the economies in transition have shown a measurable decline during 2013. At the same time, volatility in the financial markets of emerging economies has increased significantly, featuring equity market sell-offs and sharp depreciations of local currencies—both partly triggered by the Fed announcement that it might taper the amount of its monthly purchases of long-term assets later in the year. Waning growth prospects for emerging economies have also played a role in triggering the decline of capital inflows. The unconventional monetary policies, or so-called quantitative easing (QE), adopted by major central banks in the aftermath of the global financial crisis have had a significant influence on the net capital inflows to emerging economies. The QE programmes injected substantial liquidity into global financial markets and at the same time repressed long-term interest rates in developed countries. As a result, in a search for higher yields, a significant amount of capital flows was driven to markets of primary commodities and markets of equities and bonds in emerging economies in the period 2009-2012. However, in late 2012 and early 2013, as systemic risks associated with the sovereign debt crisis in the euro area abated and the prospects for economic recovery in the United States and Japan 4
See the G20 Labour and Employment and Finance Ministers’ Communiqué, Moscow, 19 July 2013, available from http://www.g20.org/documents/#p3.
5
Data and definition of private capital inflows in this section are based on Institute of International Finance, “Capital flows to emerging market economies”, IIF Research Note, 7 October 2013, while the forecasts for 2014 are revised based on Project LINK baseline forecasts. The data differ from those presented in chapter III, which cover all developing and transition economies and apply the “net net flows” concept, which is net inflows less net outflows. The use of “net inflows” would focus on the effects of volatility in foreign capital inflows, while the use of “net net flows” focuses on the effects of balance-of-payment.