Mr Viñals said a $1.3 trillion (£912bn) corporate debt timebomb in China also posed “potentially serious challenges” to financial stability if defaults pushed banks over the edge.
The IMF’s global financial stability report said a “loss of market confidence” would drag global bourses into a bear market.
Under this scenario, Stocks in the UK, US, eurozone and China would lose a fifth of their value over two years, it estimated.
The triple threat of slower growth, rising risks from China and diminished faith in policymakers’ ability to prevent a fresh downturn meant households and businesses were likely to save more and spend less in the uncertain global environment.
Economic powerhouses such as China and India would see output losses of more than 4pc by 2021 compared with current IMF forecasts, it said, while world output world be 3.9pc lower relative to the baseline.
“This would be roughly equivalent to foregoing one year of global growth, said Mr Viñals.
Low inflation and nominal growth would also push debt burdens in struggling countries such as Greece and Japan to fresh highs.