IMF Warning: Risk of global financial crash has increased

IMF’s financial counsellor José Viñals, has said the threat of instability and recession was one of a “triad of risks” that could knock 3% off global GDP. Second was debt and disharmony in Europe. Third is centred on global markets that will transmit shocks rather than cushion the blow.

Viñals drew attention to the emerging economies of China, Brazil, Turkey and Malaysia. He called on banks to remain vigilant and be ready to increase their stimulus programmes should emerging economy issues contaminate the financial system. Viñals follows turmoil over the summer as China attempted to increase exports through a currency devaluation.

Viñals also said that the IMF’s Global Financial Stability report indicated that over the last 12 months developed economies were regaining momentum while reducing their exposure to global shocks.

John Fleetwood of 3D Investing said: “I would tend to agree. We are now in a weaker position to respond to any future financial crisis, having reduced interest rates to virtually nothing and flooded the markets with money.”