DC, USA: The IMF's World Economic Outlook says that
the world economy is set to grow 4.3 per cent this year
and also the next, which is above the 3.9 per cent average
of the past decade. The rise in performance will come
despite higher oil prices and a battering from Hurricane
Katrina, the IMF revealed today.
its twice-annual World Economic Outlook, the International
Monetary Fund downgraded its forecast for global growth
in 2006 from the 4.4 per cent expected in April but retained
this year's projection.
world economy has proved tremendously resilient over the
last few years," IMF chief economist Raghuram Rajan
said. "Disease, natural disasters and soaring oil
prices have only caused minor blips in an overall picture
of healthy growth," he said. Still, it warned that
risks were rising, fuelled by a lack of government savings,
widening current account imbalances, growth distortions
among regions and higher oil prices.
oil prices hit record levels above $70 a barrel last month,
more than double the levels at the start of last year.
Rajan said there were no signs that oil-market speculators
were driving prices higher. Instead, they seemed to be
chasing them. He said there was a chance that higher oil
prices could trigger broad inflation and push interest
rates up. Rajan also told a German paper, that there was
a likelihood of a price of around $80 a barrel.
IMF has also pared its 2005 forecast for the world's largest
economy, the United States, to 3.5 per cent from 3.6 per
cent it envisioned in April due to the impact from Katrina
and lower consumer confidence from rising inflation cutting
into nominal wages, and rising interest rates slowing
house price growth. It also trimmed the US outlook for
2006 to 3.3 per cent from 3.6 per cent.
has also criticised Washington's "unambitious"
plan to cut the US budget gap in half by the time President
George W. Bush leaves office in early 2009. The US budget
deficit hit a record $412 billion ($541.32 billion) last
economy looked poised for a recovery with the IMF forecasting
the economy would grow 2 per cent this year and next.
In April, it had projected 0.8 per cent growth.
fund said the growth outlook for the euro area remained
sombre amid weak domestic demand, with projections drifting
down to 1.2 per cent for 2005 and 1.8 per cent next year.
The IMF said the European Central Bank should be ready
to cut interest rates if the economy falters again.
fund said 2005 Chinese growth was now poised to reach
9 per cent, up from 8.5 per cent predicted in April. In
2006, Chinese growth was likely to ease to 8.2 per cent.