The International Monetary Fund (IMF) is warning of another global recession and chastising governments and global institutions for being unprepared to weather the next financial crisis.
In a speech delivered in London, England on Wednesday, IMF Deputy Director David Lipton said that efforts to convince governments that they should "fix the roof while the sun shines" have been unsuccessful. "Like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete," he said.
Lipton, the second-highest-ranking executive at the IMF, said there is a pressing need to work towards limiting the next, inevitable global downturn to a "garden-variety recession," rather than a global meltdown similar to what occurred a decade ago.
However, most nations have fewer tools at their disposal than they did back in 2008 following years of deficit spending and soaring debt levels.
"We should not expect governments to end up with the ample space to respond to a downturn that they had 10 years ago," said Lipton. He added that "enduring public resentments" might make the sort of corporate bailouts and stimulus packages that limited the damage of the Great Recession in 2008 a much harder sell the next time around.
The IMF isn't the only institution sounding the alarm on another global financial crisis. On Monday, BlackRock, the world's largest money management firm, released its annual "Global Investment Outlook," and put the risk of the world slipping into a recession in 2019 at 19%. By 2020, the company predicts a 38% chance of a major downturn, and that rises to 54% in 2021.
Other economists are sounding the alarm over potential meltdown triggers, such as U.S. President Donald Trump's trade war with China or a no-deal on Brexit. Last month, Mark Carney, Governor of the Bank of England, outlined a worst-case scenario for the U.K.'s impending divorce from Europe, including an economy that could shrink by 8%, the value of commercial property tumbling by almost half, an unemployment rate above 7%, and the British pound trading 25% below the U.S. dollar.
