Regency Associates: The International Monetary Fund (IMF) has warned that the global economy is “highly vulnerable to adverse shocks” ahead of a meeting of G20 finance ministers and central bank officials on Friday.

The IMF’s report suggests that weakness brought on by financial market turmoil and plunging asset prices renders the global economy less able to cope with systemically negative developments. It cites the slowdown in China as adding to the concerns and uncertainty.

“As usual, the IMF is telling us what we already know and have known for quite some time,” said Shem Orbison, Regency Associates’ chief economist. “We don’t agree with their assertions on China, though, because, in our opinion, the concerns over the country’s economy are being seriously overplayed. Their efforts to make the transition to a more consumption-led economy seem to be going rather well and we think the result will be sustainable.”

The IMF downgraded its forecast for global economic growth in mid-January to 3.4% from 3.6% and says the Washington-based lender-of-last-resort will almost certainly revise its forecast lower before the end of the 2nd quarter.

“There’s no reason to suspect the G20 finance ministers meeting will come up with anything in the way of individual country structural reforms. As always, it will be left to the central banks and monetary policy to do the heavy lifting in terms of spurring growth,” explained Orbison.

Regency Associates said it would continue to advise clients to take positions in assets that will be boosted by loose monetary policy.
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