The International Monetary Fund’s First Deputy Managing Director, David Lipton warned on Tuesday that `storm clouds’ are gathering over global economy, while governments and central banks might not be well equipped to cope.
The fund had been urging governments to “fix the roof” during a sunny last two years for the world economy, David Lipton said.
“But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,” he said at a banking conference hosted by Bloomberg. Warning that the strains could leave policymakers under pressure and in uncharted water.
“Central banks would likely end up exploring ever-more unconventional measures. But with their effectiveness uncertain, we ought to be concerned about the potency of monetary policy.”
Many governments won’t have much room for manoeuvre, either, having already racked up high debts.
“We should not expect governments to end up with the ample space to respond to a downturn that they had 10 years ago,” Lipton said. Stimulus may also be a hard sell politically, considering the financial burden it creates, he said.
He emphasised that the recently announced ceasefire between Washington and Beijing is vital and hopes it leads to a durable agreement that avoids an intensification or spread of tensions.”, because, if it doesn’t and a stalemate sets in, there could be a damaging “fragmentation” of the global economy that causes a downturn.
