IMF warns global financial stability under increasing pressure as political risks continue to rise
The International Monetary Fund (IMF) says increasing political issues are impacting global financial stability, leading to lower expectations for global trade growth.
Launching its April 2025 Global Financial Stability Report, IMF monetary and capital markets director Tobias Adrian said the risks to global growth were mounting amid market turbulence and trade uncertainty.
“[T]here are really two main factors here—the overall level of policy uncertainty has increased [a]nd the forecast of economic activity going forward is slightly lower,” Mr Adrian said.
Securities markets falling
The IMF noted that equity and securities markets had been falling as the US Trump administration has rolled out tariffs and trade actions, countered by retaliatory measures from other countries.
“So far, markets are doing what they are supposed to do and functioning smoothly,” Mr Adrian said.
“There’s a repricing relative to the higher level of uncertainty but, as I said at the beginning, there are both upside and downside risks and we could certainly see upside if uncertainty is reduced going forward.”
“Market conditions have been quite orderly; the moves are notable in treasuries, in equities, in exchange rates, but they are within movements we have seen in recent years and really reflect the higher level of volatility.”
Pronounced inflows
Mr Adrian said the cumulative inflows into bonds and stocks from around the world had been quite pronounced.
“To what extent these movements in the exchange rate and any associated flows are just temporary or have a more permanent impact remains to be seen and it really depends on how the current uncertainty is going to be resolved,” he said.
“It is notable that the dollar declined but I wouldn’t jump to conclusions in terms of how permanent that move may be.”
Banking sector resilience
The report found that macroprudential measures put in place since the 2008 global financial crisis seemed to be working at this point, with the banking sector holding up in the face of market rumbling.
“It is the policy framework around the banking system and the non-banks that are so important to create resilient and deep financial markets that are then facilitating adjustments relative to new policy developments.”
“Markets have been very orderly and we think that the regulatory and policy framework is very key to that achievement.”
Gold uncertainty
Mr Adrian said it was still too early to tell the long-term implications for commodities such as gold.
However, IMF research director Pierre-Olivier Gourinchas said weakened expectations for global trade growth were likely to impact oil exporters as demand flattens.
The IMF’s April 2025 World Economic Outlook forecast oil prices to decline 15.5% in 2025 and supply growth to outpace “tepid demand growth” through 2026, when it expects prices to fall further.
“We have seen oil prices declining since our last projection and the decline is coming from weaker global demand and weakening global activity,” Mr Gourinchas said.