World Faces ‘Lost Year’ as Policymakers Sleepwalk Towards Fresh Crisis, Warns IMF
- World Faces ‘Lost Year’ as Policymakers Sleepwalk Towards Fresh Crisis, Warns IMF
by The world is sleepwalking into a fresh crisis as investors start to lose faith in policymakers’ ability to revive the global economy, according to the International Monetary Fund.
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In its bluntest warning to date on the costs of policy inaction, the IMF said “financial and economic stagnation” could take hold unless governments prevented a “pernicious feedback loop of fragile confidence, weaker growth, low inflation and rising debt burdens” from forming.
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José Viñals, the head of the IMF’s financial stability division, said a prolonged slowdown could knock around 4pc off global output relative to current expectations over the next five years amid repeated bouts of market turmoil.
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Mr Viñals said a $1.3 trillion (£912bn) corporate debt timebomb in China also posed “potentially serious challenges” to financial stability if defaults pushed banks over the edge.
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The IMF’s global financial stability report said a “loss of market confidence” would drag global bourses into a bear market. Under this scenario, Stocks in the UK, US, eurozone and China would lose a fifth of their value over two years, it estimated.
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The triple threat of slower growth, rising risks from China and diminished faith in policymakers’ ability to prevent a fresh downturn meant households and businesses were likely to save more and spend less in the uncertain global environment.
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