World Economy Highly Vulnerable- IMF Warns G-20


Ahead of the upcoming G-20 meet in Shanghai, an IMF report warns to the need for new mechanisms to protect the most vulnerable countries, as the world economy is highly vulnerable owing to various reasons. The international financial body says that the global economic growth is on a low, and could be further worsened by the oil price crash, geopolitical conflicts and the market turbulence.

“The global recovery has weakened further amid increasing financial turbulence and falling asset prices. Strong policy responses both at national and multilateral levels are needed to contain risks and propel the global economy to a more prosperous path,” the report says.

Going by the paper which will be presented to the finance ministers and central bank chiefs of the G-20 countries,the IMF is also expected to lower its forecast for world growth in 2016.

“Global activity has slowed unexpectedly at the end of 2015, and it has weakened further in early 2016 amid falling asset prices.”

How countries should react to the threats to growth will be the main agenda in the Shanghai talks. The IMF is urging countries to boost fiscal stimulus and to push through reforms in order to increase demand.

It also says that central banks, including the US Federal Reserve, need to keep monetary policy accommodative to ensure that tighter financial conditions do not stifle the growth momentum. Also to avoid over-reliance on monetary policy, near-term fiscal policy should support the recovery where appropriate and provided there is fiscal space, focusing on investment.