IMF chief warns against global financial stability risks

Kristalina Georgieva, International Monetary Fund chief warned on Monday against the increasing financial stability risks, stressing on the need for vigilance with the recent banking sector crises.

IMF chief said at the China Development Forum 2023 is expectantly a challenging year, as the global growth rate is declining to three percent following the Russian-Ukrainian war, monetary tightening and pandemic recovery.

“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates, necessary to fight inflation, inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” said Georgieva.

Policymakers acting decisively in response to financial stability risks, and this eased the market stress to some extent, but there is still a state of uncertainty and it underscores the need for vigilance, added Georgieva.

The IMF predicts China’s economy to grow by 5.2 percent in 2023, with a rebound in private consumption after the county reopened after the pandemic. Georgieva pointed to China’s economic recovery is a beacon of hope to the global economy.

“The robust rebound means China is set to account for around one third of global growth in 2023, giving a welcome lift to the world economy, a one percent point increase in growth in other Asian economies is a welcome boost,” Georgieva stated.

Georgieva’s comments come after recent turmoil in the financial sector, as Silicon Valley Bank collapsed and the latest acquisition of Credit Suisse by UBS.