Macroscope | Cause for jubilation is very much exaggerated as global markets are sleepwalking in unison toward a cliff’s edge. Here’s why
- The global economy has slowed to its lowest growth rate since the Global Financial crisis, yet is awash with liquidity and debt, both public and private
- Credit quality is sliding and the financial system is vulnerable
This may sound too pessimistic, at a time when the global economic outlook appears to be brightening on hopes of a US-China trade deal, a generalised shift toward dovish central bank policies and some pickup in China’s economy.
But such optimism is unjustified if we are to believe the IMF. The case it makes for caution in a trilogy of recent reports – the World Economic Outlook, the Global Financial Stability Report and the Fiscal Monitor – is more than a little convincing.
What the IMF says essentially is that the global economy has slowed to its lowest growth rate since the Global Financial crisis, yet is awash with liquidity and debt, both public and private. Credit quality is sliding and the financial system is vulnerable.
The IMF’s latest findings are based on its “new framework for comprehensive assessment of balance sheet vulnerabilities across financial and non-financial sectors,” and they do not make for comfortable reading.