World Bank Chief Economist Sounds Alarm on Emerging Market Debt Issues, Urges Liberalization

Economic

Bond

Summary:

The IMF on Tuesday slashed its economic forecasts for the U.S., China and most countries and warned that more trade strife would further slow growth. It forecast global growth of 2.8% for 2025,.

Spiking trade uncertainty is compounding rising debt and sluggish growth problems facing emerging markets and developing countries, but cutting their own tariffs could provide a big boost, said Indermit Gill, the World Bank's chief economist.

Gill said global economists were rapidly lowering their growth forecasts for advanced economies and somewhat less so for developing countries, at least for now, in the wake of a tsunami of tariffs announced by U.S. President Donald Trump.

The International Monetary Fund and World Bank spring meetings this week in Washington have been dominated by worries about the economic fallout from century-high U.S. tariffs - and retaliatory ones announced by China, the European Union, Canada and others.

The IMF on Tuesday slashed its economic forecasts for the U.S., China and most countries and warned that more trade strife would further slow growth. It forecast global growth of 2.8% for 2025, half a percentage point lower than its January forecast.

The World Bank won't issue its own twice-yearly forecast until June, but Gill said a consensus of global economists showed sizeable downgrades in forecasts for growth and trade. Uncertainty indices, which were already running far higher than a decade ago, also spiked after Trump's April 2 tariff moves.

Compared to earlier shocks, including the 2008-2009 global financial crisis and the COVID-19 pandemic, the current shock is the result of government policy, which meant it could also be reversed, Gill said in an interview with Reuters on Thursday.

He said the current crisis would further depress growth in emerging markets, after steady declines from levels around 6% two decades ago, with global trade now slated to grow by just 1.5% - well below the 8% growth seen in the 2000s.

"So it's a sudden slowdown on top of a situation that wasn't particularly good," he said, noting that portfolio flows to emerging markets and foreign direct investment (FDI) were also declining, much as they did during earlier crises.

"FDI was 5% of GDP in emerging markets during good times. Now it's actually 1% and so both portfolio flows and FDI flows are down overall," he said.

NEGOTIATE TRADE DEALS

High debt levels mean that half of some 150 developing countries and emerging markets are either unable to make debt service payments or at risk of getting there, a rate that was double the level seen in 2024, and could grow further if the global economy slowed, Gill said.

"If global growth slows down, trade slows down, more countries and interest rates stay high, then you are going to get many of these countries getting into debt distress, including some that are commodity exporters," he said.

Net interest payments as a share of gross domestic product - a measure of how much countries spend to service their debts - now stand at 12% for emerging markets, compared to 7% in 2014, returning to levels last seen in the 1990s. The rates are even higher for poor countries, where debt servicing costs eat up 20% of GDP now, compared to 10% a decade ago, he said.

That means countries are spending less on education, health care and other programs that could boost development, he said.

Interest rates are also slated to stay high, given rising inflation expectations, which means countries' debt could rise further if they needed to roll over existing debt, Gill said.

He said his advice to developing countries was to quickly and urgently negotiate agreements with the U.S. to lower their own tariff rates and avert high U.S. tariffs, and to extend lower tariff rates to other countries.

Doing so now made sense, with U.S. pressure potentially easing domestic resistance. World Bank modeling showed that such moves could boost growth substantially, Gill said.

Source: Reuters

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Political

Economic

China–U.S. Trade War

President Donald Trump’s administration has drafted a framework to handle negotiations with trading partners rushing to secure deals to avert tariff hikes, according to people familiar with the matter.

Under the blueprint, US negotiators will use a template that lays out common areas of concern to help guide the discussions, the people said, speaking on condition of anonymity to detail the plan. Among those categories are tariffs, non-tariff barriers, digital trade, economic security and commercial concerns.

The talks would see the US host negotiators from a select number of countries each week, in a bid to manage the flood of foreign governments and trading blocs seeking tariff relief ahead of a mid-July deadline. That framework could change, according to the people familiar, and officials could raise additional issues specific to certain countries.

The administration’s plans were first reported Friday by the Wall Street Journal. Under the structure, the US will hold discussions with about 18 countries — six every week — over three weeks, in a rotation until they hit the deadline, the Journal reported.

The Office of the US Trade Representative, in a statement, said it is “working under an organized and rigorous framework and moving ahead quickly with willing trading partners.”

“President Trump and USTR have made U.S. objectives clear and our trading partners have a very good sense of what they can each individually offer,” the statement added. “This is why USTR is receiving dozens of meaningful and substantial proposals from countries in pursuit of fair and reciprocal trade with the United States.”

The effort offers to provide more clarity for a process that has unnerved equity and bond markets and left major US trading partners struggling to determine how to carry out talks with the US and what Trump is seeking.

Trump earlier this month announced sharp tariff increases on about 60 countries but then quickly paused those measures for three months to allow trading partners to negotiate deals, keeping in place a baseline 10% rate during the negotiating period. That has set off a flurry of visits from foreign delegations eager to strike a deal.

A South Korean delegation held talks earlier this week and Trump told reporters Friday that an agreement with Japan is “very close.”

Source: Bloomberg

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Cryptocurrency

Stocks

Bitcoin (BTC) has been on fire this week, rising 12% over the past seven days as of 2 p.m. ET on Friday. Investors have been in "risk on" mode this week as trade tensions between the U.S. and nearly every country in the world seem to be easing, for now.

That helped companies downstream of Bitcoin's price, like Bitcoin miners. TeraWulf (WULF) is up 36% this week, Riot Platforms (RIOT) jumped 26.1%, and MARA Holdings (MARA) is up 17% for the week.

Bitcoin's big move

Cryptocurrencies have jumped this week as trade tensions eased around the world. The tensions didn't technically have anything to do with cryptocurrencies, but they certainly impact the value of tokens.

Bitcoin, in particular, has proven to be highly correlated with growth stocks and magnifies the market's move in general. So, when investors bought growth stocks earlier this week, it's no surprise that Bitcoin was up sharply as well.

What's interesting about the move recently is that Bitcoin hasn't been a hedge to the market or a safe haven to investors. Gold rose as the market fell, which is what many investors would expect Bitcoin to do, but it didn't, falling with the rest of the market.

Why Bitcoin miners were up so much

So, why were Bitcoin miners up more than Bitcoin itself? They tend to be a leveraged bet on the price of Bitcoin for two reasons.

First, Bitcoin is their source of revenue, and when Bitcoin rises, they all make more money. The second impact is the Bitcoin they already hold on the balance sheet. MARA Holdings had 46,000 Bitcoins at its last disclosure, Riot Platforms has 19,223 Bitcoins, and TeraWulf has $274.5 million in cash and Bitcoin.

Higher Bitcoin values quite literally improve their balance sheets.

Leveraged growth in Bitcoin mining

The other big news item for miners this week was Riot Platforms announcing a $100 million credit facility with Coinbase (COIN) backed by Bitcoin. Coinbase has begun making loans to consumers with Bitcoin as backing, but this is the biggest deal it's done with a corporation.

If Riot and others can use Bitcoin as collateral for loans that will fund growth, it could be another catalyst for their businesses. Bitcoin mining hasn't been the easiest business to finance historically so this is welcome news for the industry. Given the high value of Bitcoin on their balance sheets, this could be a great funding source long term.

Bitcoin is the key

Ultimately, the price of Bitcoin is going to determine the fortune of these companies. It's their source of revenue and a huge part of their balance sheets.

Investors also need to keep in mind the leveraged nature of the mining business. Values have gone up sharply as Bitcoin has risen, but if we go through another crypto winter we can see both balance sheets and operations deteriorate quickly. If that kind of risk isn't what you're looking for, Bitcoin is a great alternative.

Source: The Motley Fool

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Central Bank

Forex

Former Federal Reserve Governor Kevin Warsh, with whom President Donald Trump is reported to have discussed firing U.S. central bank chief Jerome Powell and installing him in his place, on Friday unleashed a barrage of criticism of the Fed and argued for fundamental changes to how it operates.

While saying he believes in the "operational independence" of the Fed, Warsh told a conference in Washington organized by the Group of Thirty, an international body of financiers and academics, he believes the Fed has gone beyond its remit and undermined its own claims to independence.

He urged the Fed to stop relying on "data dependence" to guide its decisions, and on forward guidance to let the public know where rates may be headed. And he blamed the central bank for aiding the expansion of the U.S. national debt and for allowing inflation to surge after the COVID-19 pandemic.

"Fed claims of independence in bank matters undermine the case for independence in the conduct of monetary policy," Warsh said. "And when the Fed turns away from its creed and tradition, exercising powers that are the province of the Treasury Department, or taking positions on societal issues, it furtherjeopardizes its operational independence in what matters most."

NERVOUS MARKETS

Trump has repeatedly criticized Powell for not cutting interest rates since the Republican president took office in January. His escalating rhetoric against the Fed chief, along with hints he might try to remove him, triggered on Monday a selloff on financial markets that were already under pressure from fears that Trump's sweeping tariffs could send the U.S. economy into a recession.

Trump has since said he has no intention of firing Powell and also appears to have backed off his aggressive trade war with China.

The Wall Street Journal reported that Trump has privately been talking about firing Powell for months, discussing the possibility with Warsh as recently as February. The WSJ said Warsh advised the president to leave Powell as Fed chief until his term expires in May 2026.

Trump's interest in having Warsh, a Republican who served in former President George W. Bush's administration and previously worked for Morgan Stanley, take over the top Fed job dates to his first term as president, when he ended up picking Powell instead to replace Janet Yellen.

The president soon soured on Powell, railing publicly about too-high interest rates. In 2020, he called out Warsh at a White House signing of a China-U.S. trade pact and said he "would have been very happy" to have him heading the Fed instead of Powell.

Warsh, currently a visiting fellow at Stanford University's Hoover Institution and an advisor to the Duquesne Family Office LLC, was a Fed governor from February 2006 to April 2011, leaving about a year before Powell became a governor.

During his tenure at the Fed, Warsh was frequently an advocate for tighter, not easier, monetary policy and criticized the Fed's expansionary balance sheet policy. While stating the Fed must maintain monetary policy independence, Warsh also has argued it should not overstep its financial stability role to rescue banks, and should not expect autonomy for other functions, including regulatory policy or consumer protections.

Treasury Secretary Scott Bessent has said the administration will start interviewing candidates for the top Fed job in the fall.

Source: Reuters

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Stocks

Economic

A packed upcoming week for markets will test a U.S. stocks rebound, with investors focused on a wave of corporate results led by Apple and Microsoft, while the prospect of global trade developments threatens to cause volatility at any time.

The monthly U.S. employment report, data on first-quarter U.S. economic growth and an inflation update add to the potential market-sensitive events in the coming week, as investors weigh whether the recent strength suggests the worst of a tariff-induced equities tumble is over.

With the S&P 500 on pace for a solid week of gains, the U.S. benchmark index has pared its recent slide by about half but remains down some 10% from its February record high.

Sentiment for equities has been lifted this week by signals of easing in the Trump administration's trade stance, including possible de-escalation with China. But the situation remains fluid and fresh developments on tariffs could undermine the market gains.

"There seems to be some potential for compromise on the tariff situation," which has supported the recent rally, said Michael Mullaney, director of global markets research at Boston Partners.

But stocks will remain sensitive to "the news flow that day," Mullaney said. "If it's positive on tariffs, the market goes up. If it's negative on tariffs, the market goes down."

Investors are bracing for more twists and turns on trade after President Donald Trump this month paused many of the heftiest import tariffs on other countries until July. Trump's pullback came after his April 2 announcement of sweeping levies set off severe stock volatility and rattled the bond market.

Tariff uncertainty will be a critical topic for upcoming corporate reports.

About 180 S&P 500 companies representing over 40% of the index's market value are set to post quarterly results in the coming week, according to UBS. Chief among them are Apple, Microsoft, Amazon and Meta Platforms, four of the "Magnificent Seven" megacap tech and growth companies whose shares have faltered in 2025 after putting up massive gains the prior two years.

With over one-third of S&P 500 companies having reported, profits are on pace to beat expectations for the period. S&P 500 earnings are on pace to have climbed 9.7% in the first quarter from a year ago, up from an estimate of an 8% gain on April 1, according to LSEG IBES.

"People were expecting the worst, and that typically happens when markets retrench," said King Lip, chief strategist at BakerAvenue Wealth Management in San Francisco. "But the numbers really haven't been that bad."

Still, some companies have pointed to challenges ahead. Consumer staples company Procter & Gamble, soda and snacks company PepsiCo and medical equipment maker Thermo Fisher all cut their annual profit forecasts.

Investors also will watch the extent to which the new global trade regime is hitting economic data, with broad concerns the new tariffs will drive up prices and slow growth.

Data in the coming week includes gross domestic product for the first quarter, and the March reading of the personal consumption expenditures price index, a key inflation reading.

The monthly U.S. jobs report, due on May 2, could provide the biggest test for markets. The labor market has demonstrated stability in recent months, and employment is expected to have climbed by 135,000 jobs in April, according to a Reuters poll.

But doubts about the economic outlook are being fueled by dour readings in consumer sentiment and other surveys, with investors eager to see if such troubling "soft data" will translate into weakness in reports seen as giving more concrete evidence about the economy.

"If the consumer is going to be the engine of ongoing growth in the U.S., it puts the burden of proof onto the jobs report," said Bob Savage, head of markets macro strategy at BNY.

Source: Reuters

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Cryptocurrency

Political

Paul Atkins’ first public event as chairman of the U.S. Securities and Exchange Commission was a crypto roundtable on Friday, where the new agency chief devoted his inaugural speech to assuring the industry that he'll continue to remake securities policy to favor digital assets innovation.

The agency and industry have been awaiting congressional action to establish crypto market-structure oversight that will likely set guardrails, and Atkins told an audience at the SEC's Washington headquarters that the regulator will work toward delivering "a rational, fit-for-purpose framework" for crypto.

However, in answer to a question from CoinDesk after his speech, Atkins indicated that the agency may be able to act to some degree during this wait for new laws.

"It's always good to have Congress' input, and if there's a statute to back up what we're doing, I think that's all the better," Atkins said. "But we have ample room to maneuver under existing rules and laws."

Atkins further suggested that he thinks the concept of special-purpose crypto broker dealers, a little-used registration most prominently represented by Prometheum, has been very successful and may need to be reconsidered, and he said the agency will look at whether custody rules need to be changed to "accommodate crypto assets and blockchain technology."

Atkins previously appeared at a swearing-in ceremony earlier this week in the White House, where Trump said "he's the perfect man to lead this agency" at a time when the digital assets sector needs regulatory clarity, and Atkins said a "top priority of my chairmanship will be to provide a firm regulatory foundation for digital assets." But Friday's event at the SEC's headquarters represented his first full-fledged engagement with the public.

The crypto sector has high hopes for Atkins, though his stand-in for the past few months — Commissioner Mark Uyeda — already took a number of decisive actions to reverse the regulator's earlier crypto reluctance under former Chair Gary Gensler. As interim chairman, Uyeda reversed or sidelined a number of crypto policy efforts pursued under Gensler and has abandoned most of the regulator's prominent enforcement actions targeting the industry.

Until now, industry expectations for Atkins' leadership were based on conjecture rooted in his experience advising and investing in digital assets firms, especially since his Senate confirmation hearing failed to explore his crypto views.

Atkins had served as an adviser to crypto entities such as the Digital Chamber and as a board member of tokenization firm Securitize, and his ties to Off the Chain Capital had previously linked him to its investment stakes in big crypto companies like Digital Currency Group (DCG) and Kraken.

Friday's roundtable was the third in a series the agency has held on crypto matters, this time focused on custody in the industry. Crypto custody has been a particularly dicey topic at the agency, which under Gensler's reign had sought to approve a policy demanding investment advisers put their clients' digital assets only with certain qualified custodians. Gensler had argued that the rule was meant to exclude most of the existing crypto platforms as suitable custodians, but the effort was put on ice.

Atkins was asked by reporters on the event's sidelines about President Trump's own crypto interests and whether Trump's memecoin, $TRUMP, will rob credibility from the White House on industry policy.

"I have no comment on any of that," Atkins said.

Source: Coindesk

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Political

Economic

China–U.S. Trade War

The European Union will do all it can to engage with the U.S. on trade and reduce the massive uncertainty that is weighing down the global economy, Irish Finance Minister Paschal Donohoe said on Friday, underscoring unity among the bloc's members.

"What we are trying to do in our engagement with the U.S. through the (European) Commission is try to identify ways in which we can reduce that uncertainty and find a way of reaching an agreement," Donohoe told Reuters during the spring meetings of the International Monetary Fund and World Bank in Washington.

The meetings have been dominated by a tsunami of tariffs announced by U.S. President Donald Trump, including a 10% tariff on most countries except China, Mexico and Canada. The import duties have upended the global trading system and are dampening growth.

The IMF on Tuesday slashed its economic forecasts for the U.S., China and most countries, citing the impact of U.S. tariffs now at 100-year highs and warning that rising trade tensions would further slow growth. It forecast global growth of 2.8% for 2025, a cut of half a percentage point from its January forecast.

Donohoe said he was confident the EU would remain unified in its dealings with the U.S. EU Commissioner for the Economy Valdis Dombrovskis is due to meet with U.S. Treasury Secretary Bessent on Friday.

On Wednesday, Dombrovskis stressed that the EU would prefer to reach a negotiated solution with the U.S. over trade but will respond with countermeasures if discussions do not lead to a solution.

"The trade competence is very clearly with the Commission," Donohoe said. "We will be supporting the Commission in their work and working hard to maintain unity and consensus in the Commission's work, which they are doing an excellent job in maintaining."

Donohoe said this week's meetings in Washington left no doubt about the risks facing the global economy.

"I'm walking away from these meetings with a clear sense of everything that is at stake and the risks that are there for jobs, for growth, for living standards all over the world," he said. "The meetings here ... reminded me of why we need to leave no stone unturned in the next few weeks and months to see how we can reduce that uncertainty."