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Financial stability risks grow, IMF warns

Disruptions to asset markets could trigger global economic stagnation, Fund says

NEW YORK (AVRUPA TIMES)-Risks to global financial markets has increased due to high uncertainty and decline in commodity prices, the IMF warned Wednesday. The Fund stressed there is less certainty in economic growth and less confidence in investors toward stability in the financial markets. In addition, disruptions to global asset markets and falling commodity prices, especially crude oil, added to the concerns around the world, while worries about the slowdown in the Chinese economy also created risks that this could create spillovers to the global markets.

 

"These developments tightened financial conditions, reduced risk appetite, raised credit risks, and stymied balance sheet repair, undermining financial stability," the IMF said in its Global Financial Stability Report.

 

The Fund warned that disruptions to asset markets could trigger a prolonged slowdown, turmoil and lead to financial and economic stagnation worldwide.

 

The IMF advised that additional measures are needed to deliver a "more balanced and potent policy mix for improving the growth and inflation outlook and securing financial stability."

 

Some of the remedies the organization suggested were that policymakers in different markets build a stronger plan for growth based on current economic conditions.

 

In advanced markets, more measures and regulations should be taken by insurance companies, while emerging markets need to increase their resilience against possible global turmoil due to their current slow growth rates.

 

As for Turkey, the IMF said it may need more reserves because the "reserve levels are not high relative to their short-term external financing requirements."

 

While Turkey continues to have significant external imbalances, the Fund said, its “domestic-demand driven growth leads to persistent import growth, and the need to finance the current account deficit with portfolio flows exposes the economy to external shocks."

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