IMF world economic outlook

IMF world economic outlook

The International Monetary Fund (IMF) held its World Economic Outlook Press Conference on Wednesday (April 13) in Washington DC. Mr. Raghuram Rajan, the Economic Counsellor and Director of the IMF Research Department, reminded that global growth was 5.1% in 2004. Moving on to the current year, Rajan indicated that growth has begun to pick up momentum after a slow start. Despite volatile oil prices and rising interest rates in the US, the IMF forecasts 4.3% global growth in 2005. While the institution expects a recovery in both the Euro zone and Japan, China will account for the bulk of growth this year. The IMF anticipates 3.6% GDP growth for US in both 2005 and 2006, with robust investments countering a drop-off in domestic consumption. The Euro zone is expected to expand little. The IMF pegs the zone's growth at 1.6% in 2005 and 2.3% in 2006 due to low domestic demand. With predicted GDP growth of 2.8% and 3.0%, Spain is expected to remain the fastest growing country of the zone. The Japanese economy is due for a turn around as growth could reach 0.8% and 1.9% in 2005 and 2006 respectively. Rajan predicts that the China will continue to see a fair share of investments. However, the quality of the investments has Rajan worried. The IMF predicts 8.5% and 8.0% growth for China over the next two years. India is also expected to show sound GDP growth of 6.7 and 6.4% in 2005 and 2006. However, The organization believes that India needs additional investment, especially in infrastructure. Russia is expected to post 6.0% growth in 2005 and 5.5% in 2006. The rest of the CIS countries are expected to show robust growth of 7.7% and 7.0% through 2006. The IMF predicts 4.5% growth each year through 2006 for Central and Eastern Europe. In sum, emerging markets and developing countries are expected to grow 6.3% in 2005 and 6.0% in 2006. On the other hand, advanced economies, such as the US, Euro zone, Japan, UK and Canada, are expected to show 4.3% growth in 2005 and 4.4% growth in 2006. The world trade volume of goods and services is expected to grow 7.4% in 2005 and 7.6% in 2006. Advanced economies will likely see a 6.5% and 6.3% increases in imports in 2005 and 2006. Their exports may increase as much as 5.9% and 6.8% during the same period. As for developing countries, they can expect imports to increase 12.0% in 2005 and 11.0% in 2006. Going the other way, these countries will likely experience export growth of 9.9% and 9.7% during the same period. Higher interest rates, volatile oil prices and increasing current account imbalances are seen as the major threats to the global growth. Developing countries and emerging markets are expected to continue closing the gap with advanced economies.