BIS warns global economy could suffer serious ‘relapse’
International central banking body's annual report stresses that there will not be enough "medicine" left in the chest to bring about a recovery next time
The global economy could face a “relapse” of the crisis that rocked the world a decade ago, the Bank of International Settlements (BIS) warned in its annual report on Sunday, stressing that there would not be enough “medicine” available to treat the problem this time, AFP reported.
“Things look rather fragile,” BIS chief economist Claudio Borio told reporters. “There is little left in the medicine chest to nurse the patient back to health or care for him in case of a relapse.”
The Basel-based BIS, which is the central bank for central banks, said the recovery after the 2007-2008 global financial crisis had been “highly unbalanced,” with emerging economies especially under pressure.
Borio said central banks around the world had for years been administering “powerful medicine” to alleviate the crisis in the form of “unusually and persistently low interest rates.” He said this had helped boost economic activity, “but some side effects were inevitable.”
As an example, he highlighted the crises that have recently emerged in Turkey and Argentina, which he said are “withdrawal symptoms” resulting from the central banks lowering the dosage.
After years of highly accommodating monetary policy, the US Federal Reserve has begun raising interest rates and the European Central Bank (ECB) said it will end its stimulus program at the end of 2018.