The International Monetary Fund says credit crunch may impact supply chain

While the outlook in the Global Financial Stability Report is for continued recovery and a gradual improvement in financial stability, considerable risks remain.

By ·

Progress to restore global financial stability has suffered a setback in advanced economies, the International Monetary Fund said in its latest Global Financial Stability Report, with markets still sensitive to negative surprises.

While the outlook in the Global Financial Stability Report is for continued recovery and a gradual improvement in financial stability, considerable risks remain. Rising public debt burdens, funding challenges for banks, and increased uncertainty about the next phase of the recovery have prevented a return of confidence.

José Viñals, Financial Counselor and Director of the IMF’s Monetary and Capital Markets Department, said the financial system remains the “Achilles’ heel of the recovery” because of unfinished repairs to bank balance sheets and the need for further regulatory reforms.

“As a result, financial markets remain sensitive to negative surprises, and can quickly shift back to crisis mode,” said Viñals.

Carlos Gutierrez, chairman of Global Political Strategies. Speaking at the Council of Supply Chain Management Professional’s (CSCMP) annual meeting in San Diego last week, also noted that public debt is still high and rising in many advanced economies. Both he and Viñals maintain that more needs to be done to ensure sustainability.

According to the IMF, coordinated government support programs and the announcement of ambitious fiscal reforms have helped contain the market turmoil that broke out in April and May this year. However, fiscal risks remain elevated, particularly in advanced economies where public sector balance sheets have significant weaknesses.

Meanwhile, risks in emerging economies have declined in the past six months, and countries have benefited from inflows of capital as investors seek out higher returns and better growth prospects, notably in Asia and Latin America. As advanced economies continue to struggle with high debt levels, emerging economies are expected to near pre-crisis low debt levels in the next few years.

The IMF said there is the potential for substantial asset reallocation to emerging markets from advanced economies, which could mean a surge in capital flows.

While countries have a number of different macroprudential tools to deal with the risks associated with large capital inflows, the IMF said policies should focus on measures that improve the capacity of local markets to absorb the capital.


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
Digital Issue: The Current State of Third-Party Logistics Services
It has become quite clear that logistics professionals are now facing an unprecedented set of challenges. From tightening capacity, to ongoing regulation hurdles, to the complexity brought on by e-commerce, today’s shippers are transforming the way they manage their logistics operations.
Download Today!
From the June 2017 Issue
Here are five trends that every shipper­—and potential shipper—must watch as the demand for experienced logistics and supply chain professionals soars.
2017 Rail/Intermodal Roundtable: Volume stable, business steady
Cross-Border Logistics: NAFTA tune-up time
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Women in Logistics: Breaking Gender Roles to Win the War for Talent
In this session you'll hear from a panel of women who are now leading top-level logistics and supply chain operations. The panel will share their success stories as well as advice for women who are now making their way up the ladder.
Register Today!
EDITORS' PICKS
2017 Top 50 3PLs: Investment and Consolidation Maintain Traction
The trend set over the past few years for mergers and acquisitions has hardly subsided, and a fresh...
The Evolution of the Digital Supply Chain
Everyone is talking about terms like digitization, Industry 4.0 and digital supply chain management,...

2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...