Latest news with #GlobalFinancialStabilityReport
Hans India
04-05-2025
- Business
- Hans India
Big reforms in major expenditure programmes key for higher growth
The 'World Economic Outlook' has been released at the right time by the International Monetary Fund (IMF). It has come up with several crucial factors as a run-up to the 2025 Spring Meeting of the World Bank Group and IMF. These meetings are of significance as it features major discussions involving world leaders, central bank governors, bankers and policy makers. The World Economic Outlook has analysed the global growth outlook in the light of the current uncertainties due to major trade policy shifts and consequences of the tariff war between USA and China. According to new estimates, the world output which was at 3.3 per cent in 2024 is now projected downwards at 2.8 per cent this year and three per cent in 2026. The volatility in equity, bond markets as well as in the forex market are considerable and it could erode a substantial wealth of the investors and result in supply chain disturbances. The United States' growth is being projected at 1.8 per cent for 2025 and 1.7 per cent for 2026. Economic growth will be affected in all advanced countries like Germany, France, Italy, and Spain. Advanced economies as a whole will show less growth at 1.4 per cent for 2025 as against 1.8 per cent as at 2024. It is projected at 1.5 per cent for 2026. It will be likewise with regard to emerging market and developing economies, whose growth was hit from 4.3 per cent at 2024 to 3.7 per cent in 2025 and projected at 3.9 per cent next year. Emerging and developing Asia, which has a substantial contribution to global growth, is likely to suffer. From 5.3 per cent in 2024, its economic growth has been projected at 4.5 per cent this year and also in 2026. China will have a steep fall from five per cent in 2024 to four per cent in 2026. India, which has the highest growth in the recent past, registered 6.5 per cent in 2024 which was lesser than the earlier plus eight per cent growth. It is also likely to have an impact due to current trade tariffs and lesser exports. The Reserve Bank of India (RBI) in its recent monetary policy has also projected lesser GDP growth at 6.5 per cent as against the earlier estimated 6.8 per cent. The impact will be felt more on countries having higher fiscal deficit and those with higher external debt. In the absence of adequate earnings in foreign exchange and less forex reserve, they will find it difficult to withstand the pressure of serving the external debt. It will be quite a task into the future given the high interest rates particularly in the US. The 'Global Financial Stability Report' cautions against an increase in risks to financial stability. The report has highlighted three vulnerabilities: 1. Valuation remains high in some key markets; 2. some highly leveraged financial institutions and their nexus with banking systems and 3. risks of market turmoil and challenges to debt sustainability for highly indebted sovereigns. There is the likelihood of downside risks to asset price, which could severally impact the emerging markets. As the interest rates in emerging economies are likely to be lowered due to inflation easing, the arbitrage spread over the advanced economies is getting reduced. As a result, there is a greater risk of capital outflow and lesser inflow of foreign funds both to equity and bond markets This will result in the currencies getting depreciated and affect exports. For frontier countries, as the bond yields are firming up, further refinancing of the maturing debt would be at a higher cost. There is also a risk that highly leveraged financial institutions could come under strain in volatile markets. While the hedge fund and asset management sectors have grown, so have their aggregate leverage levels and nexus with the banking sector from which they borrow. The third area of possible turbulence is in the sovereign bond markets. The cost of refinancing sovereign bonds may go up in view of higher bond prices and rising fiscal costs. Meanwhile, geo political tensions will result in higher spending on defence even as there is the problem of getting foreign aid. It is therefore imperative for countries with high debt to aim for fiscal consolidation plan and have medium term plan to bring down the debt levels and build buffers against heightened uncertainties. There is a need to have a control on expenditure and have more focus on quality of expenditure. The report talks of reforms to major expenditure programs such as energy subsidies and pensions which are crucial to reducing fiscal vulnerabilities while fostering growth, implying that countries must put their fiscal house in order. India still maintains the fastest growing economy and its macroeconomic fundamentals are strong. India had followed fiscal prudence and the fiscal deficit is estimated to be at 4.4 per cent of GDP by 2026. The government has also set a fiscal management road map by bringing the extent of the central government debt within 50 per cent by 2030. It is expected that India will be the first major trading partner to sign a bilateral agreement with USA within the deadline set by President Trump. The current challenges should be utilised to focus on productive and qualitative improvement of manufacturing sector and to provide further impetus to attract global manufacturers to India and widen our exports to hitherto untapped countries. The reforms of significance which can bring newer opportunities for greater contribution to our growth like on labour, land, capital and newer technology adoption will be the future growth drivers. Domestically also India's potential growth possibilities are higher.
Mint
27-04-2025
- Business
- Mint
In charts: Trump moves erode US status as a safe haven
When US President Donald Trump imposed his so-called 'retaliatory' tariffs on 2 April, they had been widely anticipated. However, few were prepared for the scale of the tariffs and the way they were calculated. Even as financial markets reacted in panic, some of the immediate response was different from that during similar shocks this century. Stock returns for each country over 20 days since the eve of the Trump tariff announcements on 1 April show that equities globally were down. The quantum varied. The US and Chinese markets were down sharply. As was the case with the stock market in Vietnam, which has become an alternative to China for companies looking to site factories and supply to the US market. Overall, emerging markets, even excluding China, were down. On the other hand, some other markets, notably India and Mexico, which are seen as benefiting from the possible exit of companies from China, rose sharply. Also Read | Mint Primer: What Trump's tariff tantrums mean for investors The IMF, in its latest Global Financial Stability Report , looked at how stocks reacted over the course of one week to major global geopolitical 'shocks' like the 9/11 attack and the Russian invasion of Ukraine. This shows that while markets fell, they bounced back. Stocks in commodity-exporting countries (such as the major oil exporters) saw the strongest bounce back within a week. Interestingly, both developed and emerging market stocks were up one week after the collapse of Lehman Brothers in 2008, driven in part by sharp interest rate cuts and massive liquidity infusions by central banks across the world. The Trump tariff crisis, at least in its immediate impact on markets, has been different in remarkable ways. A major difference in the reaction to the Trump tariff shock, as opposed to other shocks, was that investors no longer saw US financial instruments as safe havens. US treasuries, normally a go-to in times of uncertainty, saw a wave of selling, forcing yields up (bond prices and yields move in opposite directions). When Russia invaded Ukraine, the US dollar rose against the rupee, as well as against currencies of most emerging and developed markets. Similarly, in 2008, in the aftermath of the greatest economic crisis since the Great Depression, the dollar strengthened against both developed-market and emerging-market currencies in the fortnight after the collapse of Lehman Brothers. In sharp contrast, the Trump tariffs saw the dollar remain flat against the rupee and lose value against developed-market currencies. Geopolitical and economic shocks are usually a double whammy for Indian markets. Firstly, there's the impact on stocks. Secondly, if foreign investors sell stocks in India and pull money out, the rupee slides against the dollar. In each of four shock events over the past decade, over a 20-day period, dollar returns of the BSE Sensex have trailed its rupee returns by a substantial margin. That's the currency effect, and the rupee is losing value against the dollar. However, during the first Trump tariff shock in March 2018, when the US imposed tariffs on Indian steel and aluminium (and India responded with retaliatory tariffs in June), the dollar returns on the Sensex were about par with its rupee returns. In this round of Trump tariffs, imposed on 2 April, the Indian markets have risen in the three weeks since, with dollar returns of the BSE Sensex beating its rupee returns. Also Read | Mint Primer: How will Trump's next obsession, a weaker dollar, play out? The biggest difference is how bond markets have reacted. Typically, the US treasury bond is a safe haven, especially during economic uncertainty. But the US treasury market took a beating. This was partly due to technical reasons (large holders of bonds unwinding leveraged trades), but it also reflected a new thinking among investors that US assets were no longer as secure as before. In times of uncertainty, the cumulative change in the spread between Indian government bonds (10-year maturity) and the equivalent US treasury bond should widen, as investors dump emerging market assets and buy US treasuries. That's what happened in the immediate aftermath of the Russian invasion of Ukraine. Amid Trump tariffs, the spread widened for two days, but then dramatically tightened. Ten days after the crisis, this spread has actually shrunk by a cumulative 25 basis points. By the standards of the gigantic US treasury market, that's a massive move. is a database and search engine for public data
Fibre2Fashion
26-04-2025
- Business
- Fibre2Fashion
US tariffs key point of friction at IMF-World Bank Spring Meetings
A key point of friction at the annual Spring Meetings of the International Monetary Fund (IMF) and the World Bank—marked by a sombre tone this year—was the recent surge of US tariffs, according to an article on the World Economic Forum (WEF) website. Concerns and reduced growth projections were based on the recent surge of tariffs and protectionism, and there was debate about the role of international financial institutions in addressing climate change. A key point of friction at the annual IMF-World Bank Spring Meetings was the recent surge of US tariffs, according to an article on the World Economic Forum website. The role of international financial institutions in addressing climate change was also debated. At the meetings, the IMF highlighted the need for proactive debt restructuring and fiscal reforms to ensure long-term sustainability. "Uncertainty is really bad for business. So, the sooner there is this cloud that is hanging over our heads is lifted, the better for prospects for growth," IMF managing director Kristalina Georgieva said, emphasising the urgency of resolving related trade disputes. At the meetings, the IMF highlighted the need for proactive debt restructuring and fiscal reforms to ensure long-term sustainability. However, there was a consensus at the meetings on the need for multilateral cooperation to navigate the complex challenges ahead. Ahead of the sessions, Georgieva cautioned that global economic resilience is under threat from intensifying trade distortions, a weakening multilateral system and renewed market volatility. The IMF has already downgraded its global growth forecast, citing tariff-related disruptions, and the World Bank has expressed similar concerns. The IMF's latest Global Financial Stability Report (GFSR) shows that global financial stability risks have grown significantly, driven by tighter financial conditions and heightened trade and geopolitical uncertainties. "A trade policy settlement among the main players is essential, and we are urging them to do it swiftly, because uncertainty is very costly," Georgieva told a press conference. Fibre2Fashion News Desk (DS)
South China Morning Post
26-04-2025
- Business
- South China Morning Post
A world economy on the brink could use some win-win cooperation
The global economy is like a vehicle hurtling towards the edge of a cliff, with US President Donald Trump asleep or inebriated at the wheel. Financial markets are trying to jump off before it is too late but it is not only the US leader who seems oblivious. Advertisement It might be an exaggeration to speak of an official cover-up in the face of extreme danger but the misguided efforts by some officials to play down the risks are reminiscent of attempts in the run-up to the Great Depression to downplay the approaching calamity. US officials have offered anodyne assurances that, somehow, all will be well. To be charitable, some officials might believe they're doing the world a service by not creating alarm. The failure to acknowledge economic and financial reality was evident in a briefing on April 22 by Tobias Adrian, financial counsellor at the International Monetary Fund (IMF) and his colleagues, at the launch of the organisation's latest Global Financial Stability Report. The report identifies some potential systemic risks just like the executive summary of the IMF's World Economic Outlook does. But Adrian framed the recent alarmed reaction of financial markets as a 'smooth' absorption of shocks, suggesting that highly nervous US Treasury markets – the linchpin of the global financial system – are operating with relative calm. Advertisement By no means does everyone believe this assertion. Alex Isakov and Adriana Dupita at Bloomberg Economics note the IMF's tendency to understate the immediate impact on global growth in its initial assessment during times of crisis. 'However much the IMF may downgrade the growth forecasts to start, history suggests the ultimate blow will be worse,' they said.
Al Etihad
24-04-2025
- Business
- Al Etihad
UAE to maintain solid fiscal surpluses through 2030: IMF
24 Apr 2025 09:16 A. SREENIVASA REDDY (ABU DHABI)The UAE is expected to maintain robust fiscal health, with projections indicating consistent budget surpluses every year until its Fiscal Monitor report published on Wednesday, the International Monetary Fund (IMF) presented a positive outlook for the UAE's public finances over the coming years. The data is outlined under the table titled 'General Government Overall Balance for Emerging Economies.'According to the IMF, the UAE recorded an overall budget surplus of 4.8% of GDP in 2024. The 'overall balance' in budget terms accounts for all government expenditure, including interest payments on debt. This contrasts with the 'primary balance,' which measures the fiscal position excluding interest ahead, the IMF forecasts that the UAE will achieve an overall budget surplus of 2.9% of GDP in 2025. The surplus is projected to remain at 2.9% in 2026, then gradually improve to 3.2% in 2027, 3.5% in 2028, 3.8% in 2029, and 4% in fiscal projections are drawn from the same dataset used in the IMF's World Economic Outlook and Global Financial Stability Report. According to the Fund, its economists prepare country-specific forecasts based on the assumption that announced policy measures will be implemented, following the guidelines of the World Economic IMF also noted that the UAE's fiscal reporting includes federal and local government finances, as well as social security funds, ensuring comprehensive coverage of the public sector. The fiscal report follows the IMF's World Economic Outlook, released two days earlier, which projected the UAE's real GDP growth at 4% in 2025, rising to 5% in 2026.
