Economy 08-10-2018

The IMF warns of a possible global financial catastrophe

The world economy is on the verge of a new financial collapse, according to the International Monetary Fund (IMF). Thus, the global debt is already 60% higher than the rate of 2008, when the last financial crisis occurred.

Today, the debt has reached a huge figure of 182 billion dollars. Meanwhile, the inability to reform the banking system can cause a financial crisis on a planetary scale.

The Financial Stability Report 2018 of the IMF notes that the governments of many countries, like the financial regulators, could not carry out the necessary reforms to protect the financial system from the reckless activity of bankers and financial advisers.

According to the international institution, there is a risk that some parts of the financial system will provoke and spread a global panic.

The IMF warns that the world economy will have to face certain challenges to avoid 'the second Great Depression'.

The decisions taken after the bankruptcy of Lehman Brothers - which is considered one of the starting points of the 2008 crisis - took the economy to a delicate situation when the debt-to-GDP ratio came to represent a figure of 52% .

By way of comparison, on the eve of the 2008 crisis, the ratio was 36%. In addition, the amount of the developing economies of the world GDP according to the purchasing power parity is 16% higher than in 2008. That is, the developed countries have not yet recovered after the previous crisis.

For their part, governments and companies in developing countries are very vulnerable to the increase in key interest rates. This increase can become a highly destabilizing factor for economies.


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