Global Financial Stability Report, April 2025: Enhancing Resilience amid Uncertainty
Global Financial Stability Report, April 2025
Source details
- Canonical URL
- Global Financial Stability Report, April 2025: Enhancing Resilience amid Uncertainty
Other formats
Bibliographic details
- Published: April 22, 2025
Major assessment
- Global financial stability risks have increased significantly, driven by tighter global financial conditions and heightened trade and geopolitical uncertainty.
- The assessments and analyses in this GFSR are based on financial market data available to IMF staff through April 15, 2025, but may not reflect published data by that date in all cases.
Chapter 1 — Enhancing Resilience amid Global Trade Uncertainty: key findings
- Chapter 1 assesses that global financial stability risks have increased significantly as global financial conditions tightened and economic and trade policy uncertainty remain elevated.
- Three key forward-looking vulnerabilities support this assessment:
- (i) valuations remain high in some key markets, meaning adjustments in valuations could go further if the outlook were to deteriorate;
- (ii) some highly leveraged financial institutions and their nexus with banking systems — as the hedge fund and asset management sectors grew, so have their aggregate leverage levels and the nexus with the banking sector, raising the specter of weakly managed NBFIs being pushed to deleverage when they face margin calls and redemptions;
- (iii) risks of market turmoil and challenges to debt sustainability for highly indebted sovereigns — further turbulence could descend upon sovereign bond markets, especially in jurisdictions where government debt levels are high.
- Additional implications:
- The resulting further tightening of global financial conditions could significantly impact emerging markets’ currencies, asset prices, and capital flows.
- Emerging market economies already facing the highest real financing costs in a decade may now need to refinance their debt and fund fiscal spending at higher costs.
- Investor concerns about public debt sustainability and other fragilities in the financial sector can worsen in a mutually reinforcing fashion.
Chapter 2 — Geopolitical Risks: implications for asset prices and financial stability
- Geopolitical risk events generally exert a modest influence on asset prices; however, major events, such as military conflicts, can lead to:
- substantial decline in stock prices and raised sovereign risk premiums;
- particularly pronounced impacts in emerging markets that have limited fiscal space or international reserve buffers.
- Geopolitical risks can propagate through trade and financial linkages to other countries.
- While investors appear to price geopolitical risk into equity and option markets to some extent, the materialization of these risks can trigger financial market volatility.
- A sudden, major geopolitical risk event could weigh on the stability of banks and nonbank financial institutions, potentially posing a risk to macrofinancial stability.
Policy recommendations and risk management guidance
- Financial institutions and oversight bodies should allocate sufficient resources to identify, quantify, and manage geopolitical and market risks, including through stress testing and scenario analysis.
- Emerging market and developing economies should:
- continue efforts to develop and deepen financial markets; and
- maintain adequate fiscal policy space and international reserves to cushion against adverse geopolitical shocks.
- Strengthen monitoring of leverage in hedge funds, asset managers, and nonbank financial intermediation to mitigate the risk of forced deleveraging and contagion to banking systems.
- Prepare for potential further tightening of global financial conditions and elevated volatility in sovereign bond markets, especially where government debt levels are high.
Global Financial Stability Report, April 2025: Enhancing Resilience amid Uncertainty
Content in this bundle
- Chapter 1 Data
- Chapter 2 Data
- Chapter 1
- Chapter 2
- Chapter 2 Annex
- Geopolitical Risks: Implications for Asset Prices and Financial Stability
- Executive Summary
- Foreword
- Global Financial Stability Report, April 2025, Infographic
- Full Report