Imf Warns Of 'somewhat' Greater Global Financial Risk

Sergio Conner
October 11, 2018

The IMF, in its twice annual assessment of global financial stability, said conditions remain broadly conducive to economic growth, but are at risk of worsening should emerging markets deteriorate further or trade tensions escalate.

China is in danger of stoking risks to the country's financial stability as policies to avert a growth slowdown amid trade tensions with the USA undercut efforts to reduce threats to the economy stemming from high leverage, the International Monetary Fund (IMF) said in a report released Wednesday.

Last month, the Swiss government, raised its GDP forecast for 2018 to 2.9% from 2.4% and, earlier this year, it was announced that Swiss exports had matched and surpassed their recent growth. Fed Chair Jerome H. Powell recently said these are "extraordinary times" for the US economy.

The IMF report warned that these efforts could undermine the de-risking agenda and "entail greater risks to financial stability over the medium term should they set back progress toward reducing financial vulnerabilities".

At the top of the list are worries about emerging economies, especially Argentina and Turkey, two countries with heavy external debt that have had to raise interest rates sharply in recent months.

Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to regulatory tightening of the property sector and non-bank financial intermediation, it said.

Maurice Obstfeld, Economic Counsellor and Director of IMF (L) talks as Wafa Amr, Communication Officer of IMF listens, during their press conference at the 2018 International Monetary Fund (IMF) World Bank Group Annual Meeting at Nusa Dua in Bali, Indonesia, October 9, 2018 in this photo taken by Antara Foto.

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The IMF expects that Russia's growth will reach 1.8 percent in 2019, according to the World Economic Outlook report released on Tuesday.

It cautioned, "Turkey has a currency that is about 40 percent cheap to its long-term average, and the International Monetary Fund assumes the CA deficit will shrink from 5.7 percent of GDP in 2018 to 1.4 percent of GDP in 2019".

"We are all deeply concerned about this news and the potential impact on the business".

The head of the World Trade Organization warned that a "full-blown commercial war" could shrink global trade by almost 18% and also knock worldwide GDP, hurting the US, China, and others.

The IMF expects the United States economy to continue growing this year at 2.9%, but sees that rate falling to 2.5% next year amid the country's escalating trade war with China. "So, we will be listening very, very attentively when and if they come to us".

That initiative includes China, India and Japan, but not the United States. It also assumes that Trump imposes a 25 percent tariff on imported cars and auto parts.

U.S. President Donald Trump has accused China of deliberately manipulating its currency to gain a trade advantage, claims Beijing has consistently rejected.

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