IMF estimates cost of global financial crisis to top $4 trillion
WASHINGTON, April 22 (AFP) – The International Monetary Fund Tuesday raised its estimate of losses from the global financial and economic crisis to more than $4 trillion due to writedowns on soured credit.
The IMF said the total estimated cost of $4.054 trillion includes $2.712 trillion in losses in US-originated assets. Losses on European-originated assets were estimated at $1.193 trillion
and those of Japanese-originated assets at $149 billion.
The total cost represents what was needed and would be needed by financial institutions because of the deterioration in credit, in particular in the plunge in the value of equities backing credit, such as mortgage loans, as the global economy suffers the worst contraction in six decades.
The estimate, which covers the period from the beginning of the financial crisis in mid-2007 to 2010, was published in the IMF’s latest semi-annual Global Financial Stability Report (GFSR).
The IMF’s previous update in January of a projected loss of $2.2 trillion was based exclusively on US-originated assets, as had been the October 2008 GFSR estimate of $1.4 trillion. ”The global financial system remains under severe stress as the crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging market countries,” the IMF said.
The IMF projected that banks will bear $2.470 trillion, 61 percent, of the total losses and said that two-thirds of them have yet to be declared.