According to the International Monetary Fund, the risk of a painful slowdown in the world economy is rising due to concerns about the global banking system and fears that rising interest rates may force banks to limit lending.
The warning comes after weeks of unrest in the global banking industry, which included two bank failures in the US and UBS’s acquisition of Credit Suisse through Swiss government intermediaries. In recent weeks, concerns about bank run-ins have diminished, but concerns about additional bank failures and stricter lending standards slowing global economic growth have persisted.
The IMF slightly revised down its growth prediction for 2023 from 2.9 percent in January to 2.8 percent in its most recent World Economic Outlook report.
This week, Janet L. Yellen, the secretary of the Treasury, will meet with other international regulators to discuss the state of the financial system. An announcement of a concerted response to the recent unrest, according to a senior Treasury Department official, is unlikely. Ms. Yellen instead intended to emphasize her belief that the US banking system is secure.
Assessing the potential impact of the bank failures on the US economy as a whole is still being done by economists. In a research note published this week, Goldman Sachs analysts predicted that bank stress could cause lending to contract by as much as six percentage points, with small businesses—which depend heavily on small and midsized banks—being particularly hard hit.