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 Patrick Burnson, Executive Editor
October 08, 2010 - SCMR Editorial

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

image
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 .(JavaScript must be enabled to view this email address).

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!

Recent Entries

While core metrics were down from a very impressive July, the August edition of the Non-Manufacturing Report on Business from the Institute of Supply Management (ISM) was still very strong.

The Clean Cargo Working Group (CCWG) has released a report indicating that in 2014 average CO2 emissions in the global container shipping trades declined 8.4 percent from the year before.

UPS Freight, the less-than-truckload (LTL) subsidiary of UPS, recently announced it has rolled out a new service center facility in Franklin Park, Illinois. This is the company’s fifth Chicago-area service center along with other ones in Aurora, Chicago, Palantine, and South Holland.

Putting the renewed strength in the truckload market into a very positive perspective is a report issued by Avondale Partners analyst Donald Broughton, which was released yesterday. Entitled, “Q2’15 Trucking Capacity; Goldilocks Era Continues,” Broughton explained that in the second quarter only 70 truckload fleets failed, or exited the business. That number may seem high to some, but it is not, especially when you consider that the second quarter of 2014 saw more than five times as many truckload carriers, 375 to be exact, exit the business.

Global demand remains stable as packaging equipment providers of all sizes shift focus

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers 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. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.