IMF has revised upwards its April 2006 forecast on global
growth by 0.25 per cent. The multilateral agency now says
global economic growth will be higher than previously
thought 5.1 per cent in 2006 and 4.9 per cent in 2007.
IMF also warns of the global imbalances, caused by China''s
growing record global trading surpluses ($18.8 billion
for August 2006) and the US trade deficit ($64 billion),
in a report released ahead of the IMF and World Bank''s
annual meeting in Singapore.
of the reports:
in oil producing nations to remain high
economies to continue recovery, barring Germany, where
growth will slow as a result of an increase in VAT to
19 per cent
growth would slow from 3.4 per cent to 2.9 per cent
chance of fall in growth to 3.25 per cent in 2007
oil prices and an economic downturn in the US triggered
by a fall-off in the housing market were among factors
posing the biggest threats to continuing global growth
imbalances at root of fears. China posted a record of
$18.8 billion trade surplus with the rest of the world
in August. The US, the world''s largest economy, has
seen its trade deficit reach over $64 billion.
for disorderly unwinding of global imbalance
said central banks have to evaluate the risks of growth
and inflation, adding that some more interest rate tightening
might be necessary. Japan, which moved away from zero
interest rates in June after six years, should continue
to increase rates gradually, it added.
has raised the forecast for India''s economic growth by
one percentage point to 8.3 per cent from its April forecast
of 7.3 per cent. The revised forecast is based on higher
domestic demand and a surge in exports.
The report, however, has cautioned against rising global
oil prices and their impact on inflation, which has been
rising. The IMF has prescribed a tighter monetary policy
to curb inflation, even though such measures as increasing
interest rates could also negatively impact the growth
of the broader economy.
If interest rates rise and global oil prices remain firm,
GDP growth could be as per the earlier lower estimate
of 7.3 per cent in 2007, the report cautioned.
India''s economy has averaged about eight per cent growth
in the past three years among the highest in the
world - and the momentum expected to be sustained till
the end of the financial year, due to the expansion in
manufacturing and services sectors.
The IMF report comes days after the Indian government
said industrial output logged an impressive 12.4 per cent
year-on-year growth in July. The data showed a sustained
increase in new investments by Indian companies.
Rising middle-class incomes are driving demand for more
cars, houses and a variety of consumer goods, while improved
productivity is helping Indian companies boost exports.
In the first four months of the current financial year
(April-July), the country''s merchandise exports grew 21
per cent from a year ago. India''s outsourcing revenue
is also growing at about 30 per cent with more western
firms shifting back-office operations and software development
work to India.
The IMF, however, warned against the government''s high
fiscal deficit. "Strong spending pressures have emerged,
limiting fiscal adjustments in the year 2006-7 after more
substantial consolidation in recent years," the report
Although the government aims peg its budget deficit under
Rs150,000 ($33 billion), or 3.8 per cent of India''s gross
domestic product, this year, experts doubt its feasibility
amidst increased spending on fuel and food subsidies.
India and China as the twin engines driving the roaring
of emerging Asia, the IMF said "On the upside, there
is the possibility of even faster-than-projected growth
in China ... And in India."
IMF report, however, said a general increase in interest
rates might be necessary to check inflationary pressures.