Mexico City. Short-term risks to global financial stability remain contained, but the conditions that keep them under control facilitate the accumulation of other vulnerability factors, said the International Monetary Fund.
In its Global Financial Stability Report, released today by the multilateral organization, it details that the vulnerability factors are high asset valuations, the global increase in private and public debt and the greater use of leverage by non-financial institutions. banking.
“A further increase in economic uncertainty could increase the risks of deterioration in future growth, asset prices and bank credit growth,” he warned.
For example, the IMF stated, if we assume that real global economic uncertainty experiences an increase equivalent to that which occurred during the global financial crisis, the downward result in average global real GDP growth one year ahead worsens by 1.2 percentage points. .
“This effect is stronger when macrofinancial vulnerabilities are higher or when market volatility is more detached from uncertainty. “Uncertainty can also trigger cross-border spillovers through trade and financial ties,” he highlighted.
He explained that the increase in vulnerabilities could amplify adverse shocks, which are now more likely as a result of the high economic and geopolitical uncertainty in a context of armed conflicts and doubts about the policies that the new governments will apply after the electoral processes.
The IMF mentioned that the probabilities of increased volatility and sharp asset revaluations have increased, which could be amplified by vulnerabilities.
He detailed that the turbulence in the markets in early August 2024 when stock market volatility skyrocketed in both Japan and the United States and asset prices fell significantly around the world, revealed the violent reactions that can occur. .
These behaviors are generated when spikes in volatility interact with the use of leverage by financial institutions, thereby accelerating massive sales.
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