In its recent briefing for the G-20 Finance Ministers meeting, held in Paris last weekend, the IMF was blunt about the risks now clouding the economic outlook.
According to the Fund, the 'global economy has entered a dangerous phase', 'downside risks are severe' and the 'immediate risk is that the global economy tips into a downward spiral of increased uncertainty and risk aversion, dysfunctional financial markets, unsustainable debt dynamics, falling demand, and rising unemployment.' Indeed, it thinks that the best we can hope for is an 'anaemic recovery in major advanced economies and a cyclical slowdown in emerging economies.'
What's particularly striking about the precarious situation in which the world economy now finds itself is that it comes as no surprise. Observers have been contemplating doom and gloom for months now, and pretty much everybody knows that global economic risk is dangerously high. Yet, despite the fact that many of the current set of economic problems are well understood, there is remarkably little confidence that policymakers will be able to do much to deal with them.
If the best we can hope for is to avoid the worst, that's a pretty disturbing message about the overall health of international policymaking in the world economy.
