Risks to the global financial system have risen over the past six months and may increase with a chaotic British separation from the European Union or escalating trade tensions between the United States and China, the International Monetary Fund warned Wednesday -market.
The IMF, whose spring meetings with the World Bank start in Washington this week, noted that global economic expansion is slowing and that an abrupt decline could have a far-reaching impact. The Fund has even urged the repeal of pre-emptive regulations that may help shield the financial system in the event of a contraction.
“There is a risk that the investor’s positive sentiment deteriorates abruptly, leading to an acute tightening of financial conditions,” the IMF said in its Global Financial Stability Report. “This will have a greater effect on economies with weaker fundamentals, greater financial vulnerabilities and less room to react to shocks.”
On Tuesday, the entity reduced its overall growth expectations to the lowest level since 2016, the third decline since October. In its report Wednesday, it warned that a sharper than expected slowdown could lead to tighter financial conditions.