The International Monetary Fund Has Warned That The Virus Crisis Will Cause Lasting Damage To Businesses, Families And Countries
2021-01-27 | by CusiGO
If the credit rating of the most heavily indebted companies is lowered and China’s state-owned giants go bankrupt, if the aid is cancelled ahead of time, it will put pressure on the vulnerable families, In its latest financial stability report, the International Monetary Fund warned that the epidemic could cause foreseeable damage to businesses, both banks and non banks Family and country.
Just look at the world’s leading figures for the past 12 months and it’s enough to frustrate the most active. The Institute of international finance estimates that global debt, both private and national, soared to $277 trillion (about 230 billion euros) at the end of last year. Or, again, 365% of global GDP. In addition, by 2020, the dark year of coronavirus and 2021, about 90 million people are expected to fall into abject poverty. After billions of dollars have been injected into the economy in response to the epidemic, the financial situation of most of the planet’s public finances has become more precarious. But things may not stop there. Worse.
“The risk of financial stability is still under control. But there is no guarantee that this will continue, “Tobias Adrian and Fabio natalucci, heads of money and capital markets, wrote on the IMF blog.
The International Monetary Fund insists that the deployment of vaccines – which will be very uneven across regions of the world – makes people more optimistic at the beginning of this year. But that doesn’t mean there are no risks in the outlook. As the document released on Wednesday pointed out, “these risks threaten the financial stability of some sectors and countries.”. The fund’s technicians also warned that asset prices could adjust if investors start to bet on unbalanced growth between countries and industries.
But the most interesting part of the paper presented on Tuesday is not macroeconomic data, but references to specific actors such as households and businesses. “Although solvency issues are limited at the moment, there are still risks for non-financial companies,” the Fund said Their economists warn that the number of so-called “fallen angels” – corporate bonds that have lost their investment grade and become speculative, infamous junk bonds – has tripled since the outbreak of the hubris epidemic. “In regions such as the European Union and the United States, they have great growth potential,” the document added. On China, the International Monetary Fund has warned that the fiscal balance of China’s large state-owned conglomerates is fragile. At least 11 groups have suspended debt repayments in the past year, a clear indication of the weakness of the Asian financial giant’s financial system.
At the end of the day, Kristalina Georgieva, the lead agency, concluded that the health of the global business structure depends on the evolution and duration of the epidemic. “If investors reassess their growth prospects, liquidity pressures and the risk that those pressures translate into bankruptcy may reappear,” he said.
Half of the world’s families don’t have a clearer picture. By far, the problems of the families most affected by the epidemic have been alleviated by the support of the state and the low interest rates that have reduced their debt burden. “But the poorest families are more affected than others. This means that if government aid withdraws prematurely or the economic recovery is incomplete, the fiscal problem will intensify, “he continued.
Finally, banks are another source of concern, although the current health crisis has not yet evolved into a financial crisis. “The challenges they face in maintaining profitability, especially at low interest rates, raise doubts about their ability or willingness to continue lending in the coming quarters,” IMF experts said, They are worried that financial institutions will start to restrict credit because the failure rate they face will rise.
As they have reiterated on other occasions, IMF leaders insist that support from governments and central banks to stabilize the economy remains necessary until the economy recovers strongly. “We need to build a bridge so that everyone has access to the vaccine, which means ensuring the liquidity of households and businesses, and controlling financial risks,” they concluded.