Author(s): Claudio Borio
Date published: Nov 2018
SUERF Policy Note, Issue No 46
By Claudio Borio, Bank for International Settlements
Keywords: vulnerabilities, financial cycle, financial markets, debt, debt trap.
Ten years on after the Great Financial Crisis (GFC), and with a recovery that is quite mature, what are the main global financial vulnerabilities that risk derailing the expansion or amplifying any slowdown? As depicted by consensus forecasts, the near-term outlook – for the 12 months or so – looks still favourable. Despite recent stress in EMEs, the forecasts have changed little between May and August. But financial risks continue to build up, in their usual, gradual and cumulative way, and fault lines now appear more evident. As a result, financial factors are likely to play a key role in the materialisation of risks to the outlook, as either catalysts or amplifiers. And relative to pre-crisis, non-banks are likely to play a bigger role. Looking further ahead, there is an issue that casts a long shadow on economic prospects –globally rising debt levels relative to GDP and the possibility of a “debt trap”.
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