Clinging To Hope The World's Financial Leaders Are Far Too Sanguine About Growing Crises

Half a century ago a surprise attack on Israel by neighbouring countries marked the start of the Yom Kippur war - an event that signalled the end of the long postwar boom and ushered in a period marked by higher inflation and rising unemployment.

- Larry Elliott

So it was with a degree of trepidation that finance ministers, development ministers and central bank governors from around the world gathered in Marrakech last week for the annual meetings of the International Monetary Fund (IMF) and the World Bank.

Nobody needed reminding of what happened half a century ago.

Publicly, the line from the gathering in the Moroccan city is that it is too early to say how big a risk the war between Israel and Hamas poses to an already fragile global economy, but the warning signs are clearly there.

The IMF is clinging to the hope of a soft landing for the world economy in which activity slows but doesn't collapse under the weight of the sharpest rise in interest rates in decades. Nor does it think there is much chance of asset prices taking a tumble if interest rates stay higher for longer, as recommended by the IMF.

That seems far too sanguine an assessment, but is indicative of the complacency that permeated last week's events. To be fair, there were some modest achievements.

There was an acceptance that the IMF needs additional financial firepower. There was progress on a debt relief deal for Zambia. The new World Bank president, Ajay Banga, outlined his vision for a "bigger, bolder, better" bank.

But there was no real sense of urgency. "The bar for the meetings was set low," said Michael Jacobs, a fellow at the Overseas Development Institute thinktank.