Global Fi­nan­cial Risks on Rise, Need Po­tent Pol­icy Mix: IMF

The Economic Times - - Economy - Press Trust of In­dia

Wash­ing­ton: A “po­tent mix” of poli­cies is needed to avoid global eco­nomic stag­na­tion and tackle fi­nan­cial sta­bil­ity risks that have in­creased in ad­vanced economies on ac­count of greater un­cer­tainty, fall­ing com­mod­ity prices and con­cerns about China's growth, IMF said on Wed­nes­day.

If not han­dled ef­fec­tively, such risks — which also re­main high in emerg­ing mar­kets — will lead to eco­nomic and fi­nan­cial stag­na­tion erod­ing equiv­a­lent of one year of global growth over a five year pe­riod, it warned.

In its lat­est Global Fi­nan­cial Sta­bil­ity Re­port, IMF said that mar­ket tur­moil re­flected set­backs to growth, greater un­cer­tainty and weaker con­fi­dence, and a more bal­anced, po­tent pol­icy mix can ex­pand global out­put by an ad­di­tional 2%.

Ear­lier in the year, fi­nan­cial mar­kets re­acted neg­a­tively to the de­vel­op­ments, it said. Global eq­ui­ties plum­meted, volatil­ity rose, talk of re­ces­sion in ad­vanced economies in­creased, and bank equity prices came un­der re­newed pres­sure, IMF said, adding that it re­flected in­creased con­cerns about the abil­ity of poli­cies to off­set the im­pact of higher eco­nomic and po­lit­i­cal risks.

The sit­u­a­tion in mar­kets ap­pears sig­nif­i­cantly im­proved since Fe­bru­ary, ac­cord­ing to the IMF, fol­low­ing some bet­ter news on the eco­nomic front, as well as in­ten­si­fied pol­icy ac­tions by the Euro­pean Cen­tral Bank, and a more cau­tious stance by the US Federal Re­serve.

“A key ques­tion that this re­port ad­dresses is whether the tur­moil over the past months is now safely be­hind us, or is it a warn­ing sig­nal that more needs to be done?” said José Viñals, Fi­nan­cial Coun­sel­lor and head of the IMF's Mone­tary and Cap­i­tal Mar­kets De­part­ment.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.