Risk of post-pandemic global financial crisis

(VOVWORLD) - The COVID-19 pandemic has devastated the global economy. The International Monetary Fund warns that losses from the pandemic could total 28 trillion USD by 2025.
Risk of post-pandemic global financial crisis - ảnh 1(illustrative photo: thethaovanhoa.vn)

The pandemic has endangered global financial markets and rocked the petroleum market, gold prices, and USD exchange rates.

World debt reaches record high

The International Institute of Finance says global debt soared to a record 277 trillion USD in 2020, equivalent to 365% of global GDP. Increasing debts has been reported in all sectors and by families, governments, and businesses.

The IMF projects that global government gross debt as a share of GDP will reach 99.5% in 2021. For G20 countries, gross debt is set to reach 109% this year, while debt in all advanced economies is set to reach 125%. The IMF also projects 2021 fiscal deficits of 8.5% for the world, 9.4% for G20 countries, and 8.8% for all advanced economies. The IMF said current fiscal policy should stay in place to support vulnerable households and firms until recovery takes hold.

The ILO’s latest analysis of the labour market shows massive damage to hour worked and income, with prospects for a recovery in 2021 slow, uneven and uncertain unless early improvements are supported by human-centred recovery policies.

The COVID-19 shock of 2020 pushed many economies, including the US, the UK, France, Germany, Australia, Brazil, Canada, Japan, South Korea, Thailand, and Indonesia, into recession. The US and the EU, two COVID epicenters, recorded the slowest economic growth of 2020.

Risk of post-pandemic global financial crisis - ảnh 2COVID-19 vaccines are perhaps the best hope for ending the pandemic. (photo: Scitechdaily)

Stimulus measures create some risks of their own

Although the COVID-19 pandemic is slowing as vaccination programs roll out globally and international organizations begin to forecast a global economic recovery this year, the danger is not over.

The IMF says global cooperation in producing and distributing vaccines to all countries at low cost is vital. Any increase in new infections could erode the situation. Risks also come from political tensions, trade disputes, natural disasters, and financial disruptions.

The IMF has warned of recovery imbalance between countries and long-term changes in the world economy.

Countries have launched stimulus programs and emergency monetary solutions to rescue their economies. The US and Japan have spent 20% of their GDP on stimulus measures. Banks and financial institutions are facing big financial risks as a result of these measures, particularly in the US and the EU.

Analysts say the risk of financial collapse is high because of the over-evaluation of assets and unwieldy debt created by emergency fiscal measures.   

All current forecasts are tentative and dependent on successfully containing the pandemic.

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