The Organisation for Economic Co-operation and Development (OECD) has cautioned about emerging risks that could destabilize the global financial system. In a new report, the OECD points to persistent low growth as a key vulnerability, exacerbating existing financial risks.
Key Concerns
- Low Growth: The OECD emphasizes that prolonged periods of weak economic growth can erode the profitability of financial institutions and increase the likelihood of loan defaults.
- Volatile Capital Flows: The report also highlights the dangers of sudden and large movements of capital, particularly in emerging markets, which can create instability and currency crises.
- Asset Bubbles: The OECD expresses concern about the potential for asset bubbles to form in certain sectors, driven by low interest rates and excessive risk-taking.
Recommendations
To mitigate these risks, the OECD recommends that policymakers:
- Implement structural reforms to boost economic growth.
- Strengthen financial regulation and supervision.
- Improve cross-border cooperation to manage capital flows.
The OECD’s warning underscores the importance of proactive measures to safeguard global financial stability in an environment of heightened uncertainty.
