The global economy is confronting increased risks to growth even as the financial system likely withstands recent bank turmoil, top ministers said after meeting in Washington this week.
(Bloomberg) — The global economy is confronting increased risks to growth even as the financial system likely withstands recent bank turmoil, top ministers said after meeting in Washington this week.
“The growth outlook remains subdued and downside risks have increased,” according to a statement Friday by Spanish Economy Minister Nadia Calvino, who chairs the International Monetary Fund’s top advisory panel.
“Policymakers have taken swift actions to strengthen confidence in the banking system, which remains sound and resilient, supported by the reforms implemented after the 2008-09 global financial crisis,” according to the statement.
The release was issued as a chair’s statement because the panel, the International Monetary and Financial Committee, failed to reach full agreement on a joint communique amid disagreements over language around Russia’s invasion of Ukraine.
The 24-member committee, representing the fund’s 190 member nations, discusses issues of common concern to IMF members and advises the the fund on the direction of its work.
The war “continues to be the single most important source of uncertainty around the world,” Calvino said during a press briefing Friday in Washington. Still, she said, there was consensus among the IMF’s members nations on language other than regarding the war, and for ensuring that the global financial safety net works for countries.
The statement said officials “will address data, supervisory, and regulatory gaps in the bank and in particular the non-bank financial sectors, where further progress in addressing vulnerabilities is important.”
The IMF earlier in the week trimmed its global-growth projections, warning of high uncertainty and risks as financial-sector stress adds to pressures emanating from tighter monetary policy and Russia’s invasion of Ukraine.
The unexpected failures last month of Silicon Valley Bank and Signature Bank and the collapse of Credit Suisse Group AG roiled markets and ignited financial-stability concerns, complicating central banks’ quest to tame inflation while maintaining growth and the health of the banking system.
Countries are stepping up to provide support and close a funding gap for the Poverty Reduction and Growth Trust, the IMF’s main vehicle for providing interest-free loans to the lowest-income countries, Managing Director Kristalina Georgieva said at the news conference alongside Calvino. Countries will redouble efforts to meet those targets by the fund’s annual meetings in Morocco in October, Calvino said in her statement.
The IMFC said that it’s committed to revisiting the fund’s quota, or weighting of countries at the fund, by Dec. 15. The US in the past opposed changes that would give China and other emerging markets a greater voice based on their larger contributions to the world economy.
US Treasury Secretary Janet Yellen in her statement for the IMFC meeting called for “a new quota formula that is both fair and simple and primarily reflects the economic size of its member countries.”
(Updates with comments from IMFC chair in sixth paragraph.)
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