IMF Warns of Weakening Global Economy

The world economy continues to weaken and is becoming “highly vulnerable” to shock, warns the International Monetary Fund.

In a report issued this week, the IMF predicts modest recovery for mature economies and weaker growth potential for emerging markets.

The resulting “fragile conjuncture” can’t be resolved with monetary policy alone, the IMF says. Its report urges advanced economies to do more to bolster supply and demand. It says emerging markets must strengthen growth and restore resilience, in part by easing financial vulnerability and even manipulating foreign exchange if necessary to avoid market disruption.

The IMF also urges growth strategies applied on an international scale. It says continuing turbulence in financial markets and falling asset prices could hobble growth for developed markets by extending tight financial conditions. Likewise, reduced capital flow into emerging economies may worsen their financial climate.

The IMF’s worried outlook mirrors last week’s assessment by the Organization for Economic Cooperation and Development. OECD cites a “substantial” risk to the world economy and urges a multinational policy response.