IMF deputy director: The current economic situation "scares everyone"

Dark clouds have been gathering over Davos...

IMF deputy director: The current economic situation "scares everyone"

Andrew Stuart / PA / Anti-capitalism demonstration in London

A leading official from the International Monetary Fund (IMF) has warned that global markets could continue to deteriorate after yesterday's sell-off.

Zhu Min, the IMF's deputy director says that markets are growing increasingly unstable.

"The key issue is that liquidity could drop dramatically, and that scares everyone," he said, speaking at the World Economic Forum in Davos, Switzerland.

He is concerned that panic selling will continue as investor sentiment deteriorates.

"If everybody is moving together we don't have any liquidity at all. We have to be ready to act very fast," he said.

Mr Min added that he is worried that policy-markets do not fully understand the complexities of the global financial system.

China

"What is driving this is that the central banks are not coming to the rescue," Harvard professor Kenneth Rogoff observed, speaking at the event.

He says that after exhausting both low-interest rates and quantitative easing as means to stimulate economic activity, markets are panicked as China's economy slows.

Mr Rogoff adds that we have learned that China is not the "perpetual growth machine," that some thought it was.

As political and economic leaders gather in Switzerland oil has continued its slide - dipping to below €27 per barrel.