Beijing, Mar 26 (UNI) Global financial stability is now facing greater risks, as the transition from low to high interest rates puts a strain on economic systems, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said on Sunday.
"It is also clear that risks to financial stability have increased. 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," Georgieva said at the 2023 China Development Forum in here.
She warned that 2023 is likely to be another challenging year, with global economic growth slumping to below 3 percent due to "scarring from the pandemic," the Ukraine conflict and monetary tightening.
"Uncertainties are exceptionally high, including because of risks of geo-economic fragmentation which could mean a world split into rival economic blocs — a ‘dangerous division’ that would leave everyone poorer and less secure," IMF chief said, noting that the medium-term outlook for the global economy is expected to remain weak.
Although the outlook is somewhat better for 2024, global growth will remain "well below" its historic average of 3.8 percent, Georgieva warned, adding that "spring is yet to come" for the world economy.
On Saturday, vice-chairman of the China Center for International Economic Exchanges, Zhu Min, told the forum that the bankruptcy of Silicon Valley Bank (SVB) in the United States could be partly explained by the fact that the world is experiencing the most rapid rise in interest rates in history — by 500 basis points over the past 12 months.
UNI/SPUTNIK AKJ