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have been reduced by $600 billion to $3.4 trillion as the world
economy grows faster than previously expected, the International
Monetary Fund said Wednesday. The organisation 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 presented in Istanbul, Turkey, the fund
said concerted efforts by governments and central banks to deal with
the crisis and fledgling signs of a global economic recovery have
helped limit the losses. The report came ahead of the IMF and World
Bank annual meetings in Istanbul on October 6- 7. "Systemic risks have
been substantially reduced following unprecedented policy actions and
nascent signs of improvement in the real economy," the IMF report
said. "There is growing confidence that the global economy has turned
the corner, underpinning the improvements in financial markets," it
added. The IMF said its analysis suggests that US banks are more than
halfway through the loss cycle to 2010 , whereas in Europe loss
recognition is less advanced, reflecting differences in the regions'
economic cycles. A top IMF official noted that the conference in
Istanbul was taking place just over a year since the Lehman Brothers
bankruptcy triggered the sharpest phase of the global financial and
economic crisis. "Fortunately, the situation is very different
today," said Jose Vinals, IMF Financial Counsellor and Director of
the Monetary and Capital Markets Department. "We are on the road to
recovery, but it doesn't mean that risks have disappeared." "Bank
balance sheets have been stabilized," Vinals said. But "there is
still a substantial need for capital" to safeguard the financial
system. 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 3 percent from 2.5 percent.
