The Global recovery remains slow, with growing regional divergences and little margin for policy error
The baseline forecast is for global growth to slow from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024, well below the historical (2000–19) average of 3.8 percent. Advanced economies are expected to slow from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024 as policy tightening starts to bite. Emerging market and developing economies are projected to have a modest decline in growth from 4.1 percent in 2022 to 4.0 percent in both 2023 and 2024. Global inflation is forecast to decline steadily, from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024, due to tighter monetary policy aided by lower international commodity prices. Core inflation is generally projected to decline more gradually, and inflation is not expected to return to target until 2025 in most cases.
Monetary policy actions and frameworks are key at the current juncture to keep inflation expectations anchored. Chapter 2 documents recent trends in inflation expectations at near- and medium-term horizons and across agents. It emphasizes the complementary role of monetary policy frameworks, including communication strategies, in helping achieve disinflation at a lower cost to output through managing agents’ inflation expectations. Given increasing concerns about geoeconomic fragmentation, Chapter 3 assesses how disruptions to global trade in commodities can affect commodity prices, economic activity, and the green energy transition.
Executive Summary:
The global recovery from the COVID-19 pandemic and Russia’s invasion of Ukraine remains slow and uneven. Despite economic resilience earlier this year, with a reopening rebound and progress in reducing inflation from last year’s peaks, it is too soon to take comfort. Economic activity still falls short of its prepandemic path, especially in emerging market and developing economies, and there are widening divergences among regions. Several forces are holding back the recovery. Some reflect the long-term consequences of the pandemic, the war in Ukraine, and increasing geoeconomic fragmentation. Others are more cyclical in nature, including the effects of monetary policy tightening necessary to reduce inflation, withdrawal of fiscal support amid high debt, and extreme weather events.
Global growth is forecast to slow from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024. The projections remain below the historical (2000–19)
average of 3.8 percent, and the forecast for 2024 is down by 0.1 percentage point from the July 2023 Update to the World Economic Outlook. For advanced economies, the expected slowdown is from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024, amid stronger-than-expected US momentum but
weaker-than-expected growth in the euro area. Emerging market and developing economies are projected to have growth modestly decline, from 4.1 percent in 2022
to 4.0 percent in both 2023 and 2024, with a downward revision of 0.1 percentage point in 2024, reflecting the property sector crisis in China.
Forecasts for global growth over the medium term, at 3.1 percent, are at their lowest in decades, and prospects for countries to catch up to higher living standards are weak. Global inflation is forecast to decline steadily, from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024. But the forecasts for 2023 and 2024 are revised up by 0.1 percentage point and 0.6 percentage point, respectively, and inflation is not expected to return to target until 2025 in most cases.
Risks to the outlook are more balanced than they were six months ago, on account of the resolution of US debt ceiling tensions and Swiss and US authorities’ having acted decisively to contain financial turbulence. The likelihood of a hard landing has receded, but the balance of risks to global growth remains tilted to the downside. China’s property sector crisis could deepen, with global spillovers, particularly for commodity exporters. Elsewhere, as Chapter 2 explains, near-term inflation expectations have risen and could contribute—along with tight labor markets––to core inflation pressures persisting and requiring higher policy rates than expected. More climate and geopolitical shocks could cause additional food and energy price spikes. As Chapter 3 explains, intensifying geoeconomic fragmentation could constrain the flow of commodities across markets, causing additional price volatility and complicating the green transition. Amid rising debtservice costs, more than half of low-income developing countries are in or at high risk of debt distress. There is little margin for error on the policy front.
Central banks need to restore price stability while using policy tools to relieve potential financial stress when needed. As Chapter 2 explains, effective monetary policy frameworks and communication are vital for anchoring expectations and minimizing the output costs of disinflation. Fiscal policymakers should rebuild budgetary room for maneuver and withdraw untargeted measures while protecting the vulnerable. Reforms to reduce structural impediments to growth––by, among other things, encouraging labor market participation—would smooth the decline of inflation to target and facilitate debt reduction. Faster and more efficient multilateral coordination is needed on debt resolution to avoid debt distress. Cooperation is needed as well to mitigate the effects of climate change and speed the green transition, including (as Chapter 3 explains) by ensuring steady cross-border flows of the necessary minerals

Full Report

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The OECD/G20 Inclusive Framework on BEPS has concluded negotiations on a multilateral instrument that will protect the right of developing countries to ensure multinational enterprises pay a minimum level of tax on a broad range of cross-border intra-group payments, including for services. The Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule, which is now open for signature, is an integral part of the Two‐Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy and represents a major step forward in concluding the work under Pillar Two.The Subject to Tax Rule will enable developing countries to tax certain intra-group payments, in instances where these payments are subject to a nominal corporate income tax rate below 9%. It allows source jurisdictions – those in which covered income arises – to impose a tax where they otherwise would be unable to do so under the provisions of tax treaties.
This new multilateral instrument, delivered in the Inclusive Framework Outcome Statement on the Two-Pillar Solution in July 2023, will allow countries to efficiently implement the STTR in existing bilateral tax treaties. More than 70 developing Inclusive Framework members are entitled to request inclusion of the STTR in their treaties with Inclusive Framework Members that apply corporate income tax rates below 9% to covered payments.
“Adoption of this new multilateral instrument builds on the Outcome Statement delivered in July towards full implementation of the global tax reform, and reflects how productively and positively the international community is working together to deliver solutions for developing countries,” OECD Secretary-General Mathias Cormann said. “Importantly, the Subject to Tax Rule sets out a comprehensive provision to ensure that developing countries are able to ‘tax back’ in instances where payments sourced in their jurisdiction are not taxed at a minimum rate in a partner jurisdiction. The opening of the multilateral instrument for signature marks further progress towards the implementation of the Pillar Two minimum tax, as well as a major further step to stabilise our international tax system and to make it fairer and work better.”
The multilateral instrument was developed over the past year, via negotiations involving all the jurisdictions of the Inclusive Framework including OECD member countries, G20 countries and other developed and developing jurisdictions.
The OECD will be the depositary of the multilateral instrument and will support governments in the process of its signature and ratification. The OECD is also preparing a comprehensive action plan to support the swift and co-ordinated implementation of Pillar Two, with additional support and technical assistance to enhance capacity for implementation by developing countries.
The text of the Convention, along with an explanatory statement, is available at:  https://www.oecd.org/tax/beps/multilateral-convention-to-facilitate-the-implementation-of-the-pillar-two-subject-to-tax-rule.htm.
Detailed commentary explaining the purpose and operation of the subject to tax rule can be found in the Report on the subject to tax rule, which includes the model subject to tax rule: https://www.oecd.org/tax/tax-challenges-arising-from-the-digitalisation-of-the-economy-subject-to-tax-rule-pillar-two-9afd6856-en.htm.
 
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Expectations increasingly drive inflation dynamics. Improvements in monetary policy frameworks can better inform people’s inflation expectations and thereby help reduce inflation at lower output cost.

By Silvia Albrizio, John Bluedorn

Inflation around the world reached multi-decade highs last year. While headline inflation is coming down steadily, core measures―which exclude food and energy―are proving stickier in many economies and wage growth has picked up.
Expectations about future inflation play a key role in driving inflation, as those views influence decisions about consumption and investment which can affect price and wages today. How best to inform people’s views on inflation became an even more crucial consideration as the surge in prices fueled concern that inflation could become entrenched.
In an analytical chapter of the latest World Economic Outlook, we examine how expectations affect inflation and the scope for monetary policy to influence these expectations to achieve a ‘soft landing,’ that is, a scenario where a central bank guides inflation back to its target without causing a deep downturn in growth and employment.
Larger role for inflation expectations
Surveys of professional forecasters have shown that expectations for inflation over the next 12 months—near-term expectations—started a steady rise in 2021 in advanced and emerging market economies alike, then accelerated last year as actual price increases gained momentum. Expectations for inflation five years into the future, however, remained stable, with average levels broadly anchored around central bank targets.

More recently, near-term inflation expectations appear to have turned the corner and begun to shift onto a gradual downward path. Beyond the world of professional forecasters, we see similar patterns of inflation expectations by companies, individuals, and financial-market investors, on average.
Movements in near-term expectations are economically important for inflation dynamics. According to our new statistical analysis, after the inflationary shocks in 2021 and early 2022 started unwinding late last year, inflation has been increasingly explained by near-term expectations.
For the average advanced economy, they now represent the primary driver of inflation dynamics. For the average emerging market economy, expectations have grown in importance, but past inflation remains more relevant, suggesting that people may be more backward-looking in these economies. This could reflect in part the historically higher and more volatile inflationary experience in many of these economies.

In fact, we find that inflation in advanced economies typically rises by about 0.8 percentage points for each 1 percentage point rise in near-term expectations while the pass-though is only 0.4 percentage points in emerging market economies.
One factor that could account for this difference is the share of backward-looking versus forward-looking learners across economy groups. When information on inflation prospects is scarce and central bank communications are unclear or lack credibility, people tend to form their views about future price changes based on their current or past inflation experiences—they are more backward-looking learners. By contrast, those who are more forward-looking form their expectations from a broader array of information that could be relevant to future economic conditions, including central bank actions and communications—they are more forward-looking learners.
Policy implications of differences in learning
These differences have important consequences for central banks. As shown in simulations from a new model that allows for differences in learning and expectations formation, policy tightening has less of a dampening effect on near-term inflation expectations and inflation when a greater share of people in the economy are backward-looking learners.

That’s because people more focused on the past do not internalize the fact that interest rate increases today will slow inflation as they weigh on demand in the economy. Therefore, a higher share of backward-looking learners means that the central bank must tighten more to get the same decrease in inflation. In other words, reductions in inflation expectations and inflation come at a higher cost to output when there is a higher share of backward-looking learners.
Enhancing policy effectiveness
Central banks can encourage expectations to be more forward-looking through improvements in the independence, transparency, and credibility of monetary policy and by communicating more clearly and effectively. Such changes help people understand the central bank’s policy actions and their economic effects, boosting the share of forward-looking learners in the economy.
Simulations from the new model show how improvements in monetary policy frameworks and communications can help lower the output costs needed to reduce inflation and inflation expectations, making it more likely the central bank can achieve a soft landing.
One way central banks can improve their communications is by simple and repeated messaging about their objectives and actions that is tailored to the relevant audiences.
However, improving monetary policy frameworks and crafting new tailored communication strategies to help improve inflation dynamics can take time or be difficult to implement. Such interventions are complementary to more traditional monetary policy tightening actions, which will remain key to bringing inflation back to target in a timely manner.
— This blog is based on Chapter 2 of the October 2023 World Economic Outlook, “Managing Expectations: Inflation and Monetary Policy.” The authors of the report are Silvia Albrizio (co-lead), John Bluedorn (co-lead), Allan Dizioli, Christoffer Koch, and Philippe Wingender, with support from Yaniv Cohen, Pedro Simon, and Isaac Warren.

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The Commission welcomes today’s adoption of two final pillars of its ‘Fit for 55′ legislative package for delivering the EU’s 2030 climate targets. Ahead of the crucial COP28 UN Climate Conference, and next year’s European elections, this complete package of legislation shows that Europe is delivering on its promises made to citizens and international partners to lead the way on climate action and shape the green transition for the benefit of citizens and industries.
Commission President Ursula von der Leyen said: “The European Green Deal is delivering the change we need to reduce CO² emissions. It does so while keeping the interests of our citizens in mind, and providing opportunities for our European industry. The legislation to reduce our greenhouse gas emissions by at least 55% by 2030 is now in place, and I am very happy that we are even on track to overshoot this ambition. This is an important sign to Europe and to our global partners that the green transition is possible, that Europe is delivering on its promises.”
With the adoption today of the revised Renewable Energy Directive and the ReFuelEU Aviation Regulation, the EU now has legally binding climate targets covering all key sectors of the economy. The overall package includes emissions reduction targets across a broad range of sectors, a target to boost natural carbon sinks, and an updated emissions trading system to cap emissions, put a price on pollution and generate investments in the green transition, and social support for citizens and small businesses. To ensure a level playing field for European companies, the Carbon Border Adjustment Mechanism ensures that imported goods pay an equivalent carbon price on targeted sectors. The EU now has updated targets on renewable energy and energy efficiency, and will phase out new polluting vehicles by 2035, while boosting charging infrastructure and the use of alternative fuels in road transport, shipping and aviation.
The ‘Fit for 55’ package was tabled in July 2021 to respond to the requirements in the EU Climate Law to reduce Europe’s net greenhouse gas emissions by at least 55% by 2030. It was updated when the Commission proposed increased ambition on renewable energy and energy efficiency in the REPowerEU plan to respond to Russia’s invasion of Ukraine and boost Europe’s energy security. The final legislative package is expected to reduce EU net greenhouse gas emissions by 57% by 2030. While this legislative package is a central part of the European Green Deal, work continues on other pending legislative files and proposals, and on the implementation of legislation in the Member States. The Energy Taxation Directive, an integral part of the Fit for 55 Package, remains to be completed, and the Commission urges Member States to conclude negotiations as soon as possible.
Cutting carbon, pricing emissions, investing in people
Carbon pricing and an annual emissions cap ensure that polluters pay, and that Member States generate revenues which they can invest in the green transition. The revised EU emissions trading system gradually extends carbon pricing to new sectors of the economy to support their emissions reductions, in particular transport and heating fuels, and shipping.
With this reform, Member States will now spend 100% of their emissions trading revenues on climate and energy-related projects and the social dimension of the transition. The newly-created Social Climate Fund will dedicate 65 billion euros from the EU budget, and over 86 billion euros in total to support the most vulnerable citizens and small businesses with the green transition.
The new Carbon Border Adjustment Mechanism will ensure that imported products will also pay a carbon price at the border in the sectors covered. This is a valuable tool for promoting global emissions reductions and leveraging the EU market to pursue our global climate goals. In combination with the EU Emissions Trading System, it reduces the risk of ‘carbon leakage’, whereby companies would move their production out of Europe to countries with less strict environmental standards.
Boosting renewables and saving energy
The agreement on the revised Renewable Energy Directive sets the EU’s binding renewable energy target for 2030 at a minimum of 42.5%, up from the current 32% target. In practice, this would almost double the existing share of renewable energy in the EU. It is also agreed that Europe will aim to reach 45% of renewables in the EU energy mix by 2030.
On the Energy Efficiency Directive, negotiators agreed to a new EU-level target to improve energy efficiency by 11.7% by 2030. Member States will have to make annual savings of an average of 1.49% from 2024 to 2030. The public sector will lead the way, with a 1.9% annual savings target. The agreement also includes the first ever EU definition of energy poverty. Member States will now have to implement energy efficiency improvements as a priority among people affected by energy poverty.
Investing in clean transport
The revised CO2 standards regulation will ensure that all new cars and vans registered in Europe will be zero-emission by 2035. As an intermediary step towards zero emissions, average emissions of new cars will have to come down by 55% by 2030, and new vans by 50% by 2030.
The new Regulation for the deployment of alternative fuels infrastructure (AFIR) sets mandatory deployment targets for electric recharging and hydrogen refuelling infrastructure along European roads. In this way, the publicly accessible recharging infrastructure for cars and vans grows at the same speed as the electric vehicle fleet.
ReFuelEU Aviation sets out EU-wide harmonised rules for the promotion of sustainable aviation fuels (SAF), with an increasing minimum share of SAF required to be blended with kerosene by aviation fuel suppliers and supplied to EU airports. The FuelEU Maritime Regulation will promote the uptake of renewable and low-carbon fuels through the establishment of a target for gradual reductions for the annual average GHG intensity of the energy used onboard by ships.
Next steps
The implementation of the ‘Fit for 55’ legislation is now starting in the Member States. The National Energy and Climate Plans (NECPs) currently being finalised by Member States will need to integrate this new legislation and demonstrate how the 2030 climate and energy targets will be met at national level.
As announced by President von der Leyen in her annual State of the European Union speech, the Commission will be engaging in a series of dialogues with citizens and industry on the implementation of the European Green Deal legislation, under the guidance of Executive Vice-President Maros Šefčovič. In addition to climate legislation, development and implementation continues of the other, complementary, pillars of the European Green Deal. The European Parliament and the Council are currently negotiating several energy, circular economy, pollution and nature-related laws, with the Commission providing intensive support to make sure all these are agreed in the coming months.
Background
The European Green Deal, presented by the Commission on 11 December 2019, set out a new growth strategy for Europe. It aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy with zero net greenhouse gas emissions by 2050 and with economic growth decoupled from resource use.
The European Climate Law enshrines in binding legislation the EU’s commitment to climate neutrality and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The EU’s commitment to reduce its net greenhouse gas emissions by at least 55% by 2030 was communicated to the UN Climate Convention in December 2020 as the EU’s contribution to meeting the goals of the Paris Agreement. As a result of the EU’s existing climate and energy legislation, the EU’s greenhouse gas emissions have already fallen by 30% compared to 1990, while the EU economy has grown by around 60% in the same period, decoupling growth from emissions.
For More Information
Questions and Answers – Strengthening and expanding EU Emissions Trading with a dedicated Social Climate Fund
Questions and Answers – Increasing the ambition of the EU’s Effort Sharing Regulation and boosting natural carbon sinks
Questions and Answers – Making our energy system fit for our climate targets
Questions and Answers – Sustainable transport, infrastructure and fuels
Questions and Answers – Carbon Border Adjustment Mechanism
Factsheet
 
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Today, EU member states’ representatives reached an agreement on the final component of a common European asylum and migration policy. At a meeting of the Council’s permanent representatives committee, member states sealed their negotiating mandate on a regulation on crisis situations, including sentimentalization of migration, and force majeure in the field of migration and asylum. This position will form the basis of negotiations between the Council presidency and the European Parliament.
The new law establishes the framework that would allow member states to address situations of crisis in the field of asylum and migration by adjusting certain rules, for instance concerning the registration of asylum applications or the asylum border procedure. These countries would also be able to request solidarity and support measures from the EU and its member states.
Exceptional measures in crisis situations
In a situation of crisis or force majeure, member states may be authorised to apply specific rules concerning the asylum and the return procedure. In this sense, among other measures, registration of applications for international protection may be completed no later than four weeks after they are made, easing the burden on overstrained national administrations.
Solidarity with countries facing a crisis situation
A member state that is facing a crisis situation may request solidarity contributions from other EU countries. These contributions can take the form of:

the relocation of asylum seekers or beneficiaries of international protection from the member state in a crisis situation to contributing member states
responsibility offsets, i.e. the supporting member state would take over the responsibility to examine asylum claims with a view to relief the member state that finds itself in a crisis situation
financial contributions or alternative solidarity measures

These exceptional measures and this solidarity support require the authorisation from the Council in accordance with the principles of necessity and proportionality and in full compliance with fundamental rights of third-country nationals and stateless persons.
Background and next steps
The regulation addressing crisis situation and force majeure in the field of migration and asylum is part of the New Pact on Migration and Asylum proposed by the Commission on 23 September 2020. The pact consists of a set of proposals to reform EU migration and asylum rules. Other landmark proposals in addition to the crisis regulation include the asylum and migration management regulation and the asylum procedure regulation.

EU migration and asylum policy (background information)
EU asylum rules (background information)

 
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The main goal is to deter foreign powers from bullying the EU or its member states. Restrictions to trade, direct investment and access to the EU procurement market are among possible countermeasures. This new tool should serve as a shield protecting EU’s sovereignty.

The new trade instrument is primarily meant as a deterrent, but it will allow the EU to fight economic coercion and respond with its own countermeasures.

With 578 votes to 24 and 19 abstentions. Parliament approved on Tuesday a new trade instrument to enable the EU to respond, in line with international law and as a last resort, should the EU or member states face economic blackmail from a foreign country seeking to influence a specific policy or stance.
The Anti-Coercion Instrument (ACI) seeks to protect EU and member state sovereignty in a geopolitical context where trade and investment are increasingly weaponised by foreign powers.
What is coercion?
According to the regulation, economic coercion occurs when a non-EU country attempts to pressure the EU or a member state into making a specific choice by applying, or threatening to apply, trade or investment measures. Although this kind of coercion undermines the EU’s strategic autonomy, it is not covered by the World Trade Organisation (WTO) agreement. The WTO dispute settlement mechanism is unavailable for cases of economic coercion specifically, unless they also involve aspects that violate WTO rules.
Under the new rules, the Commission will have four months to investigate potential coercion. Based on its findings, the Council will have eight to ten weeks to decide -by a qualified majority- whether coercion exists. Although the primary objective will be to engage in dialogue to persuade the authorities of the non-EU country to cease their coercion, if those efforts fail, the EU will have a wide range of countermeasures at its disposal. If coercion is found, and member states agree, the Commission will have six months to outline the appropriate response, keeping the Parliament and the Council informed at all stages.
Potential countermeasures
MEPs enhanced the deterrent aspect of the instrument by including a comprehensive list of potential responses available to the EU, including restrictions in trade of goods and services, intellectual property rights and foreign direct investment. Imposing constraints on access to the EU public procurement market, capital market, and authorisation of products under chemical and sanitary rules will also be possible.
Repairing the injury
Under the new rules, the EU could seek “reparation” from the coercive non-EU country. The Commission may also apply measures to enforce these reparations.
Quote
Bernd LANGE (S&D, DE), rapporteur and Chair of the Committee on International Trade, said: “This instrument enables rapid reaction against coercive measures, against pressure from other countries. We have introduced clear timelines and clear definitions to say what a coercive measure is and how to react to it. We now have a broad range of countermeasures at our disposal and have filled our toolbox with defensive instruments. While this anti-coercion tool should act as a deterrent, we will also be able to take action if necessary to defend the European Union’s sovereignty.”
Next steps
Once formally adopted by the Council – expected in October -, the regulation will take effect 20 days after publication in the Official Journal.
Background
The Commission proposed the mechanism in December 2021, driven by a demand from the European Parliament and in response to economic pressure exerted by the US during the Trump administration, along with numerous confrontations between the EU and China. This new instrument complements a series of trade defence tools adopted in recent years. In May, G7 leaders announced the launch of a coordination platform against economic coercion, echoing the EU’s initiative.
 

Compliments of the European Parliament.

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Blog post by Myriam Moufakkir, Chief Services Officer |  The recent rise of artificial intelligence (AI) has led to a number of quite useful applications, such as helping doctors diagnose diseases and scientists crunch large sets of numbers. So, how does the ECB use this rapidly developing technology? As part of our core work we analyse vast amounts of data. This is the basis for good decisions that contribute to keeping prices stable in the euro area and ensure the safety and soundness of the European banking system. AI offers new ways for us to collect, clean, analyze and interpret this wealth of available data, so that the insights can feed into the work of areas like statistics, risk management, banking supervision and monetary policy analysis.
We are exploring the opportunities and challenges of AI together with other central banks in the European System of Central Banks (ESCB) and the national competent authorities in the Single Supervisory Mechanism, as well as through initiatives such as the Bank for International Settlements’ Innovation Hub. Here are a few examples of what we are doing.
What kinds of AI does the ECB use?
The first initiative concerns the data we use. Our statisticians collect, prepare and disseminate data from over ten million legal entities in Europe, which are classified by institutional sector (e.g. financial institutions, non-financial corporations or the public sector). We need these classifications to have the right data to support our decision-making. Doing this manually, however, is very time-consuming. Machine learning techniques allow us to automate the classification process, meaning that our staff can focus on assessing and interpreting these data.
The second initiative aims to deepen our understanding of price-setting behaviour and inflation dynamics in the EU. Today, by applying web scraping and machine learning, we are able to assemble a huge amount of real-time data on individual product prices. One of the challenges, however, is that the data collected are largely unstructured and not directly suitable for calculating inflation. Together with economists and researchers at the other euro area central banks – via the Price-setting Microdata Analysis network ­– we are therefore exploring how AI can help us structure these data to improve the accuracy of our analyses.
The third initiative is in the area of banking supervision. To do their job, our supervisors analyze a broad range of relevant text documents (e.g. news articles, supervisory assessments and banks’ own documents). To consolidate all of this information in one place, our colleagues have created the Athena platform which helps supervisors find, extract and compare this information. Using natural language processing models trained with supervisory feedback, the platform supports supervisors with topic classification, sentiment analysis, dynamic topic modelling and entity recognition. Supervisors can now collate these kinds of enriched texts within seconds, so they can more quickly understand the relevant information – instead of spending time searching for it.
What else do we have to keep in mind?
Large-language models (of which ChatGPT is the best known) are another area which we are exploring. And we have identified a few possible uses for them. They could be used to write initial drafts of code for experts for use in analysis, or to test software more quickly and thoroughly. These models can also analyze, summarize and compare the documents prepared by the banks we supervise. This supports the work of our supervisory teams. The technology is also capable of helping to more quickly prepare summaries and draft briefings, which can assist colleagues across the bank in policy and decision-making activities. A large language model can also help improve texts being written by staff members, making the ECB’s communication easier to understand for the public. Relatedly, we have used neural network machine translations for a while now to help us communicate with European citizens in their mother tongues.
Naturally, we are cautious about the use of AI and conscious of the risks it entails. We have to ask ourselves questions like “how can we harness the potential that large language models offer in a safe and responsible manner?”, and “how can we ensure proper data management?”. Working in close cooperation with other ESCB institutions, we are looking at key questions in the fields of data privacy, legal constraints and ethical considerations (such as fairness, transparency and accountability).
With those considerations in mind, we will continue to investigate the possibilities and challenges of using AI. The examples above are only the tip of the iceberg. By putting in place the appropriate governance, coordination, infrastructure and investment, we will pull together the various strands of our work on AI and accelerate its adoption across our organization. This will allow us to harness the technology’s full potential and allow us to remain a modern and innovative central bank: an ECB that embraces – and continues to embrace – the future.
 
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Narrowing the gap between the share of men and women who work is one of the very important reforms policymakers can make to revive economies amid the weakest medium-term growth outlook in more than three decades.
With global growth predicted to languish at just 3 percent over the next five years and with traditional growth engines sputtering, many economies are missing out by not tapping women’s potential. Only 47 percent of women are active in today’s labor markets, compared with 72 percent of men. The average global gap has fallen by only 1 percentage point annually over the past three decades and remains unacceptably wide.
To blame are unfair laws, unequal access to services, discriminatory attitudes and other barriers that prevent women from realizing their full economic potential. The result is a shocking waste of talent, leading to losses in potential growth.
We estimate that emerging and developing economies could boost gross domestic product by about 8 percent over the next few years by raising the rate of female labor force participation by 5.9 percentage points—the average amount by which the top 5 percent of countries reduced the participation gap during 2014-19. As the Chart of the Week shows, that’s more than the economic “scarring,” or output losses, inflicted on countries by the pandemic.

Policymakers can of course lift growth in many ways, from governance reforms to strengthen institutions, to financial reforms to unlock capital for investment, as discussed in a recent IMF blog. Complementing these reforms with measures to narrow gender gaps would greatly amplify these returns.
Unfortunately, present policies do not come close to closing gender gaps. Many researchers say it’s inevitable that women’s labor force participation will eventually reach that of men, even if it takes centuries. But gender gaps are unlikely to ever close if present policy trends persist, as we show in a new research paper.
Our analysis of three decades of data shows that countries have made progress increasing women’s participation, but economies of all income levels experienced several setbacks—a result of shocks, crises and policy reversals. The pandemic, for example, eroded progress closing gender gaps, especially for women with young children. Setbacks like this cause scarring that slows and often reverses progress toward gender equality.
As a result, gender gaps in labor force participation will narrow but never close if countries continue on their present policy path. Gaps would remain large for most countries, exceeding 16 percentage points in one out of ten countries.
Countries must step up efforts to break down barriers to women’s participation in the labor market—such as limited access to education, health, assets, finance, land, legal rights, and care services. They should systematically take account of how macroeconomic, structural, and financial policy packages impact women. The IMF’s gender strategy aims to assist member countries in these efforts.
 
For more information, please contact:
Antoinette M. Sayeh, Deputy Managing Director, IMF
Alejandro Badel, Senior Economist – Strategy Policy and Review Department’s Inclusion and Gender, IMF
Rishi Goyal, Deputy Director – Strategy, Policy, and Review Department, IMF
 
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Today, the Commission takes another major step to protect the environment by adopting measures that restrict microplastics intentionally added to products under the EU chemical legislation REACH. The new rules will prevent the release to the environment of about half a million tonnes of microplastics. They will prohibit the sale of microplastics as such, and of products to which microplastics have been added on purpose and that release those microplastics when used. When duly justified, derogations and transition periods for the affected parties to adjust to the new rules apply.
The adopted restriction uses a broad definition of microplastics – it covers all synthetic polymer particles below five millimetres that are organic, insoluble and resist degradation. The purpose is to reduce emissions of intentional microplastics from as many products as possible. Some examples of common products in the scope of the restriction are:

The granular infill material used on artificial sport surfaces – the largest source of intentional microplastics in the environment;
Cosmetics, where microplastics is used for multiple purposes, such as exfoliation (microbeads) or obtaining a specific texture, fragrance or colour;
Detergents, fabric softeners, glitter, fertilisers, plant protection products, toys, medicines and medical devices, just to name a few.

Products used at industrial sites or not releasing microplastics during use are derogated from the sale ban, but their manufacturers will have to provide instructions on how to use and dispose of the product to prevent microplastics emissions.
Next Steps
The first measures, for example the ban on loose glitter and microbeads, will start applying when the restriction enters into force in 20 days. In other cases, the sales ban will apply after a longer period to give affected stakeholders the time to develop and switch to alternatives.
Background
The Commission is committed to fighting microplastics pollution, as stated in the European Green Deal and the new Circular Economy Action Plan. In the Zero Pollution Action Plan, the Commission set the target to reduce microplastics pollution by 30% by 2030.
As part of these efforts, the Commission is working to reduce microplastics pollution from different sources: plastic waste and litter, accidental and unintentional releases (e.g. plastic pellet loss, tyres degradation or release from clothing), as well as intentional uses in products.
To tackle microplastics pollution while preventing the risk of fragmentation in the single market, the Commission requested the European Chemicals Agency (ECHA) to assess the risk posed by microplastics intentionally added to products and whether further regulatory action at EU level was needed. ECHA concluded that microplastics intentionally added to certain products are released into the environment in an uncontrolled manner, and recommended to restrict them.
Based on the scientific evidence provided by ECHA, the Commission drafted a restriction proposal under REACH that was positively voted by the EU countries and successfully passed the scrutiny of the European Parliament and the Council before being adopted.
 
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On September 21, the European Chips Act entered into force. It puts in place a comprehensive set of measures to ensure the EU’s security of supply, resilience and technological leadership in semiconductor technologies and applications.
Semiconductors are the essential building blocks of digital and digitised products. From smartphones and cars, through critical applications and infrastructures for healthcare, energy, defence, communications and industrial automation, semiconductors are central to the modern digital economy. They are also at the centre of strong geostrategic interests and the global technological race.
Concretely the European Chips Act will strengthen manufacturing activities in the Union, stimulate the European design ecosystem, and support scale-up and innovation across the whole value chain. Through the European Chips Act, the European Union aims to reach its target to double its current global market share to 20% in 2030.
Three Pillars of the European Chips Act
The European Chips Act consists of three main pillars.
The first pillar – the Chips for Europe Initiative – reinforces Europe’s technological leadership, by facilitating the transfer of knowledge from the lab to the fab, bridging the gap between research and innovation and industrial activities and by promoting the industrialisation of innovative technologies by European businesses. The Chips for Europe Initiative will be primarily implemented by the Chips Joint Undertaking.
The Initiative will be supported by €3.3 billion of EU funds, which is expected to be matched by funds from Member States. Concretely, this investment will support activities such as the setting up of advanced pilot production lines to accelerate innovation and technology development, the development of a cloud-based design platform, the establishment of competence centres, the development of quantum chips, as well as the creation of a Chips Fund to facilitate access to debt financing and equity.
The second pillar of the European Chips Act incentivises public and private investments in manufacturing facilities for chipmakers and their suppliers.
The second pillar creates a framework to ensure security of supply by attracting investments and enhancing production capacities in semiconductor manufacturing. To this end, it sets out a framework for Integrated Production Facilities and Open EU Foundries that are “first-of-a-kind” in the Union and contribute to the security of supply and to a resilient ecosystem in the Union interest. The Commission has already indicated at the time of the Chips Act proposal that State aid may be granted to first-of-a-kind facilities, in accordance with the Treaty on the functioning of the European Union.
In its third pillar, the European Chips Act has established a coordination mechanism between the Member States and the Commission for strengthening collaboration with and across Member States, monitoring the supply of semiconductors, estimating demand, anticipating shortages, and, if necessary, triggering the activation of a crisis stage. As a first step, a semiconductor alert system has been set up on 18 April 2023. It allows any stakeholder to report semiconductor supply chain disruptions.
Next Steps
Also today, the Regulation on the Chips Joint Undertaking (JU) enters into force, allowing the start of the implementation of the main part of the Chips for Europe Initiative. Furthermore, the Chips Fund will start its activities as well. With the entry into force of the Chips Act, the work of the newly established European Semiconductor Board will also formally start, which will be the key platform for coordination between the Commission, Member States, and stakeholders.
Under the second pillar, industry will be able to apply for planned “first-of-a-kind” facilities to obtain the status of “integrated production facility” (IPF) or “open EU foundry” (OEF). This status will allow these facilities to be established and operable within the Union, thus allowing for a streamlined approach to administrative applications and permit grants. This status will also require that these facilities comply with criteria to ensure their contribution to the EU’s objectives and their reliability as suppliers of chips in times of crisis.
Background
A common European strategy for the semiconductor sector was first announced by Commission President Ursula von der Leyen in her 2021 State of the Union speech. In February 2022, together with the European Chips Act, the Commission published a targeted stakeholder survey in order to gather detailed information on chip and wafer demand, to better understand how the shortage of chips was affecting European industry. In February 2022 the Commission proposed the European Chips Act. In April 2023 a political agreement was reached between the European Parliament and the EU Member States on the Chips Act. The measures adopted will help Europe to reach its 2030 Digital Decade targets, fostering a greener, more inclusive and digital Europe.
For more background information, please click here.
 
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