Global Financial Stability Report 2021 covers all aspects of how extraordinary policy measures are easing pressures from global economy and needed to be done more for bringing global economy back to normal.
Global Financial Stability Report 2021 Reviews Economic Recovery
New Delhi (ABC Live India): The IMF launched the new
edition of this year's Global Financial Stability Report 2021 today in Washington D.C.
global economy is beginning to emerge from the economic shock caused by the
COVID‑19 virus. The economy has benefited from extraordinary policy measures
that have eased financial conditions, preventing a deeper economic downturn.
But those actions may have unintended consequences. Valuations for risk assets
have become stretched. Financial vulnerabilities have intensified. Continuing
policy support remains necessary, but a range of policy measures are needed to
address vulnerabilities and to protect economic recovery.
Financial Stability Report covers all aspects of how extraordinary policy
measures are easing pressures from global economy and needed to be done more
for bringing global economy back to normal.
Chapter 1 warns that there is a pressing need to act to avoid a legacy
of vulnerabilities while avoiding a broad tightening of financial conditions.
Actions taken during the pandemic may have unintended consequences such as
stretched valuations and rising financial vulnerabilities. The recovery is also
expected to be asynchronous and divergent between advanced and emerging market
economies. Given large external financing needs, several emerging markets face
challenges, especially if a persistent rise in US rates brings about a
repricing of risk and tighter financial conditions. The corporate sector in
many countries is emerging from the pandemic overindebted, with notable
differences depending on firm size and sector. Concerns about the credit
quality of hard-hit borrowers and profitability are likely to weigh on the risk
appetite of banks.
Chapter 2 studies leverage in the nonfinancial private sector before and
during the COVID-19 crisis, pointing out that policymakers face a trade-off
between boosting growth in the short term by facilitating an easing of
financial conditions and containing future downside risks. This trade-off may
be amplified by the existing high and rapidly building leverage, increasing downside
risks to future growth. The appropriate timing for deployment of
macroprudential tools should be country-specific, depending on the pace of
recovery, vulnerabilities, and policy tools available.
Chapter 3 turns to the impact of
the COVID-19 crisis on the commercial real estate sector. While there is little
evidence of large price misalignments at the onset of the pandemic, signs of
overvaluation have now emerged in some economies. Misalignments in commercial
real estate prices, especially if they interact with other vulnerabilities,
increase downside risks to future growth due to the possibility of sharp price
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