The International Monetary Fund's (IMF) Managing Director, Kristalina Georgieva, warned that turbulence in the banking sector poses a risk to the global economy's financial stability. Rising interest rates have led to stress in leading economies, including among lenders, putting pressure on debts. She also highlighted the war in Ukraine and scarring from the COVID-19 pandemic as factors that could suffocate growth. The IMF chief predicts that the world economy will expand by just 3% this year and this warning comes as the European Central Bank (ECB) also expressed concerns over the impact of recent banking turmoil on business and growth.
The outlook for the UK, after Brexit, presents a challenging trade-off between low growth and high inflation, putting central bankers in a tricky position when it comes to increasing interest rates. Richard Hughes, the Chair of the UK's Office for Budget Responsibility, said Brexit would cause economic scars even deeper than the pandemic. As economic stress increases in the UK, EU, and the US, so-called shadow banks, could expose cracks in the financial system. Regulators in Switzerland continue to grapple with the fallout from the collapse of Credit Suisse, and public pressure has mounted on regulators after the vast package of support for the bank before its emergency merger with fellow Swiss bank UBS.
https://www.theguardian.com/business/2023/mar/26/imf-chief-kristalina-georgieva-global-economy-at-risk-turmoil-banking-financial-stability
3 comments:
This was a really interesting post to read. It is really interesting to see the long-lasting impact that the pandemic still has on our economy today and how it will shape the future. Overall, this was a eye-opening post that pin-points where the global economy could be heading.
In the US, we have SVB, Signature Bank and in Europe there is Credit Suisse, which is one of the world's largest banks to fail. What's next? Would this cause a chain reaction to other banks as well? How well would other banks adjust to this? What action would the Fed and ECB take to mitigate this? It is going to be very interesting
to see how things unfold.
I wonder how issues like this will affect consumer confidence. If consumer confidence is low it will be reflected in consumer spending because people will spend less and save more for fear of what's to come. This is what spiraled the SVB crisis and your post shows that this concern isn't just a US one but a more global one. I also wonder how the Fednow online payment system will play a role in the future of the banks?
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