Losses drop $600B

Likely losses from the financial crisis in the three years to 2010 have been reduced by $600 billion to US$3.4 trillion as the world economy grows faster than previously expected, the International Monetary Fund said Wednesday.

LONDON — Likely losses from the financial crisis in the three years to 2010 have been reduced by $600 billion to US$3.4 trillion as the world economy grows faster than previously expected, the International Monetary Fund said Wednesday.

The organization warned however that the impetus for far-reaching financial reforms risked being lost if the improving situation leads to complacency.

In its half-yearly Global Financial Stability Report, the fund said concerted efforts by governments and central banks around the world to deal with the crisis and fledgling signs of a global economic recovery have helped limit the losses.

“Systemic risks have been substantially reduced following unprecedented policy actions and nascent signs of improvement in the real economy,” the IMF said.

“There is growing confidence that the global economy has turned the corner. . . . ,” it added.

In Canada, the key index on the TSX has gained back about 50 per cent of its value since the lows of March.

The IMF said its analysis suggests U.S. banks are more than halfway through the loss cycle to 2010, whereas in Europe loss recognition is less advanced, reflecting differences in the economic cycle.

Over the last year, governments around the world have bailed out banks and stimulated their economies by increasing spending, while major central banks have slashed interest rates and pumped cheap money into the financial system in an attempt to get liquidity flowing again.

The growing confidence has been most evident in stock markets around the world — most of the world’s major indexes are now in positive territory for 2009 as investors have grown more optimistic about the outlook for the world economy.

Stock markets usually rally between six to nine months before actually recovery emerges and most economists reckon that most of the world’s leading economic regions will be growing by the end of the year at the very least. Already, the recessions in France, Germany and Japan have officially ended, though it will take many years for the lost output to be recouped.

The IMF’s reassessment of the potential losses stemming from the financial crisis comes ahead of Thursday’s World Economic Outlook, when the fund will publish its latest estimates for the global economy.

In Wednesday’s report, the IMF indicated the outlook would raise its baseline forecast for global growth, with advanced economies expected to register positive growth in 2010, and emerging economies projected to rebound significantly.

Most analysts expect Thursday’s report to show that 2010 global growth will be revised up to three per cent from 2.5 per cent.

Despite its more optimistic assessment of the financial fallout from the crisis, the IMF warned that risks to global stability remained high and that banks still need to rebuild their capital, strengthen earnings and wean themselves off government support.

Commercial property markets in the U.S. and Europe also continue to weaken, the IMF said.

In particular, the IMF said governments and central banks have to be careful to make sure they time the withdrawal of their assistance carefully. Otherwise they could spark a secondary crisis or endanger monetary and fiscal stability.

It also said that complacency was a worry. “Banking system problems could go unresolved and much-needed regulatory reforms may be delayed or diluted,” it said.

“Policymakers should promptly provide a plan for the future regulatory framework that mitigates the buildup of systemic risks, grounds expectations, and underpins confidence, thereby contributing to sustained economic growth,” it added.

The IMF’s warnings are likely to carry more clout than they used to. The fund has seen its role enhanced as a result of the financial crisis.

Last week, leaders of the Group of 20 rich and developing countries agreed to give it the fund more responsibility for monitoring the health of the global financial system and to create an early warning system about potential risks.

Just Posted

‘My nightmare began again’: Close call as bus carrying Humboldt crash survivor rear-ended

CALGARY — A terrifying ordeal for Humboldt Broncos survivor Ryan Straschnitzki this… Continue reading

Annual pace of housing starts picked up in November, tops expectations

OTTAWA — Canada Mortgage and Housing Corp. says the annual pace of… Continue reading

China pressures US, Canada ahead of Huawei hearing

BEIJING — China raised the pressure on the United States and Canada… Continue reading

Equalization formula a hot topic as finance ministers meet

OTTAWA — For the first time in a decade Ontario will not… Continue reading

Canada Post backlog, Greyhound exit creating headaches ahead of the holidays

Jennifer Critch hopes to spend Christmas morning watching her two young daughters… Continue reading

WATCH: Red Deer and District Kennel Club Dog Show at Westerner Park

The Red Deer and District Kennel Club is holding a dog show… Continue reading

Orlando SC acquires Canadian Tesho Akindele in trade with FC Dallas for cash

ORLANDO, Fla. — Canadian forward Tesho Akindele was traded to Orlando City… Continue reading

Koskinen notches third shutout, McDavid gets winner as Oilers blank Flames 1-0

EDMONTON — The Edmonton Oilers appear to have shored up their defence… Continue reading

Beyonce performs at pre-wedding party in India

Beyonce brought her star power to a pre-wedding party for the daughter… Continue reading

Kirk Douglas celebrates 102nd birthday

LOS ANGELES — Actor Kirk Douglas got to celebrate his 102nd birthday… Continue reading

Ellen Page steps up attack on Nova Scotia pulp mill’s effluent pipeline

HALIFAX — Hollywood actor Ellen Page is doubling down on her criticism… Continue reading

Pence aide out of running to be Trump’s next chief of staff

WASHINGTON — President Donald Trump’s top pick to replace chief of staff… Continue reading

Swath of South faces wintry mess: Snow, sleet, freezing rain

CHARLOTTE, N.C. — A massive storm brought snow, sleet, and freezing rain… Continue reading

‘I killed my best friend’: Opioids’ fatal grip on mayor, pal

MOUNT CARBON, Pa. — Janel Firestone found her son — the 24-year-old,… Continue reading

Most Read