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IMF Chief warns of financial stability risks

IMF Chief warns of financial stability risks
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March 27, 2023 (MLN): Risks to financial stability have increased in 2023 which has further increased the need for vigilance following recent turmoil in the banking sector, IMF Chief Kristalina Georgieva on Sunday warned while speaking at the China Development Forum. 

Global growth is expected to slow to below 3% due to the war in Ukraine, monetary tightening, and “scarring” from the pandemic.

"We expect 2023 to be another challenging year, with global growth slowing to below 3% as scarring from the pandemic, the war in Ukraine, and monetary tightening weigh on economic activity," she said.

Even with a better outlook for 2024, global growth will remain well below its historic average of 3.8%, she noted. 

Georgieva also noted that uncertainties are “exceptionally high” and that the outlook for the global economy will remain weak over the medium term.

In addition, she highlighted that risks to financial stability have increased as debt levels rise and interest rates transition from a prolonged period of low rates too much higher rates, which generate stresses and vulnerabilities.

Georgieva’s comments came after Silicon Valley Bank collapsed and Swiss bank Credit Suisse was taken over by rival UBS, leading to fears of contagion.

Bank shares tumbled on Friday as concerns about the health of the financial sector resurfaced. However, Georgieva acknowledged that policymakers had acted decisively in response to financial stability risks.

"So—we continue to monitor developments closely and are assessing potential implications for the global economic outlook and global financial stability. We are paying close attention to the most vulnerable countries, in particular low-income countries with high levels of debt," she added. 

She also informed that the fund will provide a detailed assessment in our forthcoming World Economic Outlook and Global Financial Stability Report, which will be published in the coming weeks."

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Posted on: 2023-03-27T10:44:11+05:00