Risks to financial stability have increased, says IMF chief calls for ‘need for vigilance’

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International Monetary Fund chief Kristalina Georgieva, on Sunday (March 26) warned that the risks to financial stability have increased and stressed the “need for vigilance”. This comes after the recent banking turmoil, however, she also noted that the decisive actions by advanced economies have calmed market stress. 

The IMF chief, who was speaking at a forum in Beijing, also reiterated her view that 2023 would be “another challenging year”, citing the war in Ukraine, the COVID-19 pandemic and monetary tightening. Global growth which is slowing down to below three per cent due to the aforementioned aspects, despite the better outlook for the upcoming year will remain well below the historic average of 3.8 per cent. 

“Uncertainties are exceptionally high,” said the IMF managing director at China Development Forum, in the context of the global economy which is likely to remain weak over the medium term. She added, “It is also clear that risks to financial stability have increased”. The Washington-based fund has predicted global growth of 2.9 per cent for this year and will release its new forecasts next month.

Georgieva also noted how the policymakers in advanced economies acted decisively to the financial stability risks after the bank collapses but despite that vigilance was needed. “These actions have eased market stress to some extent, but uncertainty is high which underscores the need for vigilance”, said the IMF chief.

This statement was made in reference to the collapse of Silicon Valley Bank and the takeover of Swiss bank Credit Suisse by rival UBS which sent ripples throughout the financial sector and led to fears of contagion.

“So, we continue to monitor developments closely and are assessing potential implications for the global economic outlook and global financial stability,” said Georgieva. She also spoke about how the fund was also paying close attention to vulnerable countries and particularly low-income countries with high levels of debt. 

Additionally, the IMF chief warned that geo-economic fragmentation could split the world into rival economic blocs and result in a “dangerous division” leaving “everyone poorer and less secure.” She also noted China’s rebound and called it a bright spot for the world economy. 

This comes after the Washington-based fund predicted that the Chinese economy will grow 5.2 per cent this year after Beijing ended its ‘zero-Covid’ restrictions and is set to account for around one-third of global growth in 2023. 

(With inputs from agencies) 


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