IMF "Possibility of Financial Capital Shortage in Emerging Markets Due to COVID-19 Impact"

Financial Stability Report Released
Emphasis on Continued Support Measures

[Asia Economy New York=Correspondent Baek Jong-min] The International Monetary Fund (IMF) has diagnosed that the vulnerability of global financial markets continues to increase due to the COVID-19 pandemic.

[Image source=Reuters Yonhap News]

On the 13th (local time), the IMF stated in its semi-annual Global Financial Stability Report (GFSR), "Since the outbreak of COVID-19, financial sector vulnerabilities have continued to grow," adding, "Triggers such as new virus outbreaks, policy mistakes, or other shocks can interact with existing vulnerabilities to lead the economy toward more adverse scenarios."

The IMF warned, "If widespread defaults occur, it could lead to a repricing of credit risk, tightening of bank lending standards, and a sharp tightening of financial conditions."

The IMF mentioned that if the COVID-19-induced recession deepens, a capital shortfall of $130 billion (approximately 149 trillion KRW) could occur in the global financial system, most of which would be in emerging market companies.

In the World Economic Outlook report released on the same day, the IMF also predicted that emerging markets would lag behind advanced countries in recovery after COVID-19.

Tobias Adrian, IMF Director, pointed out that while the global financial system has sufficient capital to withstand additional shocks, there is a weak link in emerging markets that could face difficulties.

He said, "It is important to expand multilateral support for low-income countries facing financing difficulties."

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