IMF: Boom time for global economy

The world economy will snap out of a three-year slump with unexpected vigour in 2004 and 2005, but rising interest rates will be a risk, the International Monetary Fund has said.

    Financial markets are buoyant, says the IMF

    World economic growth will bolt from 3.9% last year to 4.6% in 2004 - the fastest since 2000 - and 4.4% in 2005, the IMF said in its semi-annual World Economic Outlook on Wednesday, issued ahead of a gathering of World Bank and IMF policymakers.

      

    It was the brightest IMF assessment since the impact of the September 11 attacks on the world economy followed by the US-led war in Afghanistan and the invasion of Iraq.

     

    The global economy "seems to be by and large in the springtime of recovery," IMF chief economist Raghuram Rajan said.

      

    "The tentative buds that we saw six months ago are now blooming in many parts of the world. We've seen a strong rebound in world trade, a robust US recovery, (and) continued exceptional growth in emerging Asia, especially China."

     

    Investment

      

    Strength in the US and Chinese economies was hauling the rest of the world out of the slow years, and investment was kicking in as a major engine of activity, the IMF report said.

      

    "With global trade rising sharply, financial markets buoyant and the US economy rebounding, the balance of risks has significantly improved," the IMF said.

     

    "With global trade rising sharply, financial markets buoyant and the US economy rebounding, the balance of risks has significantly improved"

    World Economic Outlook,
    IMF

    A breakdown of the forecasts showed:

     

    - US growth will jump from 3.1% last year to 4.6% in 2004 and 3.9% in 2005.

      

    - Eurozone growth will rise from a tepid 0.4% last year to 1.7% in 2004 and 2.3% in 2005.

      

    - Japanese growth will climb 2.7% to 3.4% this year before sliding back to 1.9% in 2005.

      

    - Emerging Asia will roar, with growth unchanged from last year at 7.2% in 2004, and then 6.8% in 2005. In China, growth will ease from 9.1% last year to 8.5% in 2004 and 8% in 2005.

      

    As the world swings around, it faces new threats, the Fund said.

      

    "As recent events in Madrid and elsewhere underscore, geopolitical uncertainties remain an important - if difficult to quantify - risk; and further oil price volatility remains a concern," the IMF said.

      

    The IMF repeated its well-worn warning that the massive US budget and current account deficits - each about half a trillion dollars this year - and surpluses in Asia were a "serious concern."

      

    It urged the United States to provide a "credible plan" to restore budgetary balance.

    SOURCE: AFP


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