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

Flu immunization now available in Red Deer

Free vaccine to Albertans six months and older

Windows smashed at three Red Deer businesses

Red Deer RCMP arrest man after vandalism spree

Schizophrenia a misunderstood illness, an Alberta expert says

Schizophrenia Society of Alberta campaign kickoff features TSN’s Michael Landsberg in Central Alberta

WATCH: Collecting coats and donations from drivers in Red Deer

Central Albertans made donations to keep children warm and neighbourhoods safe from… Continue reading

PHOTO: Fall Harvest Festival in Red Deer’s West Park

The West Park Community Association hosted the Fall Harvest Festival near West… Continue reading

WATCH: Blackfalds Fire teaches families about fire safety

An open house was held Saturday in support of Fire Prevention Week

Canada gets into Women’s World Cup with 7-0 win over Panama

FRISCO, Texas — Christine Sinclair isn’t concerned about chasing records. She’s set… Continue reading

Baldwin urges ‘overthrow’ of Trump government via voting

MANCHESTER, N.H. — Actor Alec Baldwin followed up his latest parody portrayal… Continue reading

Prince Harry and Meghan expecting their 1st child in spring

CANBERRA, Australia — Prince Harry and his wife, the Duchess of Sussex,… Continue reading

Sears files for Chapter 11 amid plunging sales, massive debt

NEW YORK — Sears filed for Chapter 11 bankruptcy protection Monday, buckling… Continue reading

Doctors to debate medical pot as more patients expected to ask for prescriptions

VANCOUVER — Doctors with opposing views on whether medical marijuana should be… Continue reading

Halifax smoking ban begins today; city announces several new smoking areas

Halifax’s sweeping smoking ban begins today, two days before recreational cannabis is… Continue reading

Canadians widely unaware of accomplishments of famous women, poll suggests

TORONTO — The organization behind Canada’s Heritage Minutes says provincial education systems… Continue reading

Five things about what’s legal and what’s not in Canada’s new pot law

OTTAWA — Canada’s new law legalizing recreational cannabis goes into force on… Continue reading

Most Read