-The experience of the past decade with the rapid expansion of financial markets has underlined the importance of a constant evaluation of the private sector capital flows that are the engine of world economic growth, but sometimes at the core of crisis developments as well. This experience demonstrates that the opportunities offered by the international capital markets for enhancing global prosperity must be balanced by a commitment to prevent debilitating financial crises.
Financial markets ended the year on a positive note. Equity markets recovered and rallied noticeably from their lows of late September. In bond markets, yield spreads of corporates and high-yielding bonds, particularly emerging market bonds, narrowed against U.S. Treasuries. At the same time, the U.S. Treasury yield curve steepened, and the U.S. dollar has strengthened. Financial markets thus anticipate, and have priced in, a recovery in economic activity and corporate earnings during 2002.
At present, the consensus view that the global economy will recover during the course of 2002 is being buttressed by recent economic statistics. In spite of this widespread expectation, as well as the demonstrated resilience of the international financial system, there is no reason for complacency. In the view of many market participants, the risk of a subdued global economic recovery, subjecting the world to a second straight year of slow growth, as well as opening a gap between financial market expectations and economic performance, is not insignificant. If that were to materialize, it would exacerbate the financial imbalances and some of the underlying weakness.
Link to IMF whole report
© International Monetary Fund
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article