The report warns of four major risks – geopolitical ones aside – that could threaten the sustainability of the expansion in the medium term.
“First, a significant rise in inflation could choke the expansion by forcing central banks to tighten policy more than expected. This typical postwar scenario moved into focus last year, even in the absence of any evidence of a resurgence of inflation,” the report warned.
Other risks include financial stress as financial cycles mature, weaker consumption and investment, mainly under the weight of debt and a rise in protectionism.
“A withdrawal into trade protectionism could spark financial strains and make higher inflation more likely. And the emergence of systemic financial strains yet again, or simply much slower growth, could heighten the protectionist threat beyond critical levels,” the report warned.