Risks to global financial stability have increased and “the need for vigilance” remains after the recent upheaval in the banking sector, International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned Sunday.
Speaking at a forum in Beijing, the IMF chief said she expected 2023 “to be another challenging year”, with global growth slowing to below 3.0 percent due the war in Ukraine, monetary tightening, soaring inflation, a raft of global interest rate hikes, and “scarring” from the pandemic all bookending the recent banking crises.
Investor panic has also sent oil prices sliding about three percent on weaker demand fears owing to a possible recession.
“Uncertainties are exceptionally high,” with the outlook for the global economy likely to remain weak over the medium term, the Bulgarian economist told the China Development Forum, AFP reports. She then warned of more risks to come:
It is also clear that risks to financial stability have increased.
At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies.
Her comments came after the financial sector was shaken by the collapse of Silicon Valley Bank and the enforced takeover of Swiss bank Credit Suisse by rival UBS, leading to fears of contagion.
Bank shares tumbled on Friday as fears about the health of the financial sector resurfaced, with German Chancellor Olaf Scholz forced to give reassurances about Deutsche Bank after the long-troubled lender became a focus of investor concerns, as Breitbart News reported.
This is not the first time Georgieva has warned the world of grim economic tidings ahead.
Last October she said inflation, strains on food and energy supplies, war in the Ukraine, rising jobless numbers alongside risks of a global recession were just a few of the factors making up a “new normal” darkening the outlook for the world’s economy.
In a Georgetown University speech ahead of the Washington-based fund’s annual meetings, Georgieva said there has been a fundamental shift in the global economy from a world of relative predictability to a world with more fragility and greater uncertainty built on “shock after shock after shock.”
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