Financial and economic experts sitting at the International Monetary Fund (IMF) have projected a possible global recession amid fear of a financial crisis in the global banking sector.
According to Ripples Nigeria, IMF predicted a one in seven chance of recession gripping global economies due to the measures taken by financial regulators to tackle soaring inflations.
It stated this in its latest World Economic Outlook as world financial leaders meet in the U.S. for the ongoing Spring Meeting slated to hold for seven days, April 10 to 16.
Nigeria and other countries have raised interest rates more than four times, a move that has threatened the financial industry, leading to fear of bank collapses globally.
Two banks in the United States, Silicon Valley Bank (SVB) and Signature Bank declared insolvency, and Credit Suisse in Switzerland also called on the government for financial aid to remain operational.
There is a fear of contagion, seeing the Silicon Valley Bank subsidiary in the United Kingdom crash due to its parent company’s collapse in the U.S. IMF said the current crisis is increasing the possibility.
An economic counsellor to the IMF, Pierre-Olivier Gourinchas, said: “In such a severe downside scenario, global GDP per capita could come close to falling – an outcome whose probability we estimate at about 15pc.”
Gournichas further stated: “The financial system may well be tested again. Once again, downside risks dominate. Nervous investors often look for the next weakest link, as they did with Credit Suisse.”
Although the financial counsellor at the IMF, Tobias Adrian, said the possibility of a financial crisis is one in 20, he opined that: “Stresses could then re-emerge in the financial system. Trust – the foundation of finance – could continue to erode.
“Funding could disappear rapidly for banks and non-banks, and fears could spread, amplified by social media and private chat groups.”