The International Monetary Fund has injected a note of caution about a range of concerns which it believes could pose a threat to the growth of the global economy.
Their concerns are presented in the IMF’s Financial Stability Report which provides an in-depth study of markets and the banking sector in the wake of the Global Financial Crisis. The report warns of “dangerous undercurrents” which pose a risk to the global economy. Whilst it concludes that banks are far safer now than before the crisis, new risks have emerged. It concludes that inequality around the world has risen and that intensified trade wars could “significantly harm global growth”.
Another factor posing risks to global growth is identified as a disorderly Brexit which would “adversely affect market sentiment”. It could result in a fragmentation of European money markets which would inhibit the efficiency of financial flows, notably in Europe, but with a potential for a more widespread disruption. The IMF urges the Bank of England to be ready to inject further liquidity into the UK economy via (additional) quantitative easing, in the event of a no deal Brexit. It is highly likely that Mark Carney is planning to do just this and hike interest rates to shore up Sterling in the event of a disorderly Brexit.
Earlier in the week, the IMF noted that UK finances were at an historically weak point with high levels of national debt and a low level of state held assets, following the disposal via privatisation of substantial assets in the 1980s and 1990s. According to that report, only Portugal’s net worth was in a poorer position than the UK’s amongst leading industrialised countries. It went on to suggest that the UK would need to raise more taxes to offset the lower level of revenue it was receiving from state-held assets.