Current Financial Event Discussion – World Financial Crisis Announcement By IMF

The financial new event to be analyzed in this case is the announcement of possibility of another world financial crisis by the IMF. This announcement was done on 7th of October, 2015. According to the IMF, threat of recession and instability in the upcoming economies, and legacy of disharmony and debt in Eurozone are among some of the outlined triangle of risks that may contribute to what would be considered the third major world financial crisis. The global financial crash risk has augmented due to China slowdown and world trade decline which are undermining the highly indebt upcoming economies stability. The high borrowing scales of upcoming market nations, makes their debts to be susceptible to the US increasing interest rates. In this regard, if policy makers will not intervene swiftly and support the financial system, then the world will experience yet another severe financial crisis about 7 after the last world financial crisis whose effect affected western nation severely. The recession and instability treat hanging over economies are Malaysia, Turkey, Brazil, and China. This was one of the triangle risks which could blow off 3 percent of the world GDP. Disharmony and debt in the Europe was considered as the second risk while the third risk was based on assaulted global markets which are highly probable to transmit shocks instead of cushioning the blow (Inman, 2015).

According to the report, central banks will have to be vigilant and ready to augment their stimulus programs in case the financial challenges in the upcoming market nations spread into the world financial system. The need to be cautious at this sensitive time is very important since most countries impacted by the most recent financial crisis have not fully recovered yet from its effect. Downgrading the 2015 global financial growth by 3.1% would record the worst performance since the 2009 tough financial times in the world. Thus, the world cannot manage to take in another strong financial sway hardly 10 year prior to another one. This may destroy the economy of a number of nation so badly that they may take very long to recover. Although the most recent financial report demonstrates that western nations have managed to overcome the shock created in the 2009 financial crisis, the spread of the predicted to the western nation may destabilize their economy greatly and thus making the 2009 financial crisis recovery even much harder (Inman, 2015).

China may be the most affected nation in this financial crisis. After demonstrating great potential for the last few years, China ability to develop its economy is currently going down. This may send a great financial shock to the country and if no proper measures are taken, this could highly impact the neighboring Asian countries. The warning comes as a result of summer of chaos in world market initiated by the attempt of China to augment its flagging exports with devaluation of currency. This act flashed stock markets panic that plummeted across the globe. It is this time that the impact of slowing economy of China was first recognized by investors. Increased ambiguity regarding the fallout from feebler upcoming market economies, lower prices of commodities and possibly higher interest rate in US are increasing new concerns regarding the assets price rise sustainability, denoting a novel wave in the world economic crisis. Thus every country should be in the look out to reduce the possible effect of the shock to each particular nation (Shaffer, 2015).

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