GLOBAL FINANCIAL
STABILITY REPORT - REPORT AND INDICES
News: What is the outlook on the
global economy? | Explained
What's in the news?
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The International Monetary Fund (IMF) recently
released its global financial stability report, sounding alarms about several
key risks to the stability of the global financial system.
Key Findings of the
Report:
1. Persistent Inflation:
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IMF warns to avoid
early optimism about ending high inflation which continue to be underpinned
by the various pressures as well as geopolitical risks.
2. Market Implications:
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Investor’s faith in the central bank easing policy has fetched
additional gains such as appreciation of asset prices.
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However, market corrections are expected in the
event that inflation remains high, therefore, capital outflows are likely from
emerging economies like India.
3. Unregulated Credit
Market:
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The speedy
growth of the shadowy private market of credit which is unregulated raises
a few doubts about the financial stability, if not rightly monitored and
managed corporate credit lending might lead to bad times.
4. India’s Private
Credit:
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The fact that India’s
alternative investment funds (AIFs) grow the private credit market in terms
of volume, also necessarily entails hard line regulatory rules being applied by
such institutions as RBI and SEBI.
5. Cybersecurity Risks:
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Financial organisations are often a target for cyber-attacks, which can lead to
compromised information and financial loss.
6. India’s Response:
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Indian financial institutions are working towards
cybersecurity by collaboration and funding the CSS technologies.
Impact on India:
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In 2023, India which receives a sufficient amount
of foreign capital is likely to encounter multiple issues when the central
banks of the west deduce the rates.
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This might scare investors to pull back their money
from a developing country like India and the depreciation of their currency and
financial instability ensue as a result.
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RBI (Reserve Bank of India), may take steps to
support the rupee may hamper the growth of the economy also by providing
liquidity.
Go back to basics:
Global Financial
Stability Report 2024:
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It provides an assessment of the global financial
system and markets, and addresses emerging market financing in a global
context.
Released by - International Monetary Fund
Publication - Semi-annual (Twice per year in April and October)
Theme - The Last Mile: Financial Vulnerabilities and Risks.
Focus:
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The report focuses on current market conditions,
highlighting systemic issues that could pose a risk to financial stability and
sustained market access by emerging market borrowers.
Frequent Assessment:
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It replaced two previous reports by the IMF, the
annual International Capital Markets Report and the quarterly Emerging Market
Financing Report.
World Economic Outlook:
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The Report draws out the financial ramifications of
economic imbalances highlighted by the IMF's World Economic Outlook.
Chapters:
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High Inflation
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Unregulated credit market
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Cyber-attack on financial institutions