Global financial risks have risen in the last six months. That’s the warning from the International Monetary Fund at its Spring Meetings.
As global economic growth slows down, partly over trade tensions and Brexit, the IMF is concerned that an abrupt downturn will have severe repercussions. And that’s partly due to rising debt, as Owen Fairclough reports.
Having downgraded global economic growth, the International Monetary Fund is now worrying about the financial system itself.
“There is a tendency for countries to take on more debt, but it is risky,” Tobias Adrian, the IMF’s Financial Counsellor, told a news conference at its annual Spring Meetings in Washington DC.
Total global debt currently stands at just over $243 trillion. To put that in perspective, the U.S, the world’s biggest economy, generated over $20 trillion last year.
But the size of the debt is less worrying for some than where it’s concentrated.
For example, the IMF says risks linked to company debt is elevated to nearly 70 percent of countries considered critical to the global financial system.
Another worry: Italy’s government debt – second only to Greece – continues to drive fears of another Eurozone crisis.
And China’s debt levels have raised concerns in the West, though the IMF’s Deputy Managing Director thinks his country’s evolution from a manufacturer to a modern consumer society will reduce debt risks.
Zhang Tao told CGTN: “This process will lead to a more sustainable, more balanced, more healthy growth path for China.”
But even with elevated levels of debt across the world, major Western banks are considered much better equipped to absorb the kind of shock that almost brought down the global financial system in 2008.