SINGAPORE, Sept 12(AFP) – Global financial markets could face major corrections as investors appear to have made scant provision for risks that could hamper economic growth, the International Monetary Fund said Tuesday. “With less accommodative external financing conditions, EM (emerging market) countries that still rely heavily on external financing need to reduce vulnerabilities and pursue reforms that will help sustain their current growth performance,” it said.
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These risks include a US economic slowdown, a further run-up in oil prices and monetary policy tightening to contain inflationary pressures, the Washington-based group said in its Global Financial Stability Report.
“Under these risk scenarios, international financial markets could undergo more severe corrections, especially because markets appear to be pricing in the baseline growth scenario with little provision for risk,” the IMF said.
“The potential for a disorderly unwinding of global imbalances remains a concern,” it said in the report released ahead of the IMF and World Bank annual meetings and related events which begin in Singapore on Thursday.
The IMF in its September 2006 World Economic Outlook predicted the global economy will continue