Recession risks are rising amid 'historic fragility' in the global economy, the agency's managing director said.
"Looking at the global banking sector, we can see that it has withstood the pressures up to now, helped by high levels of capital and ample liquidity. However, the IMF's global bank stress test shows that these buffers may not be enough for some banks," Adrian said.
The world economy has endured a wild ride since COVID-19 hit in early 2020. First, the pandemic and the lockdowns it generated brought the world economy to a standstill in the spring of 2020. Then, vast infusions of government spending and ultra-low borrowing rates engineered by the Federal Reserve and other central banks fueled an unexpectedly strong and speedy recovery from the pandemic recession.
"We see that rising interest rates have brought on additional stress. Both governments facing high debt levels, as well as non-bank financial institutions such as insurance companies, pension funds and asset managers dealing with stretched balance sheets," Adrian said, adding that"the strains are particularly severe for smaller developing economies."
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