The Hindu : Global economy: IMF sees signs of recovery

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Friday, Sep 19, 2003

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Global economy: IMF sees signs of recovery

DUBAI, (UAE), SEPT. 18. The global economy is improving since the Iraq war but the pace of growth will be uneven and new dangers loom, including a ballooning U.S. budget deficit and the collapse of talks to free up trade, the International Monetary Fund said on Thursday.

Other worries range from China's growing trade surplus to a world that has become less secure following the September 11 terror attacks in America, the IMF chief economist, Kenneth Rogoff, said.

"We have this rise in underlying geopolitical uncertainties and everybody loses by that,'' Mr. Rogoff said, adding it could "knock a quarter of a per cent off global trend growth over the next 20 years.''

Despite the various threats to progress, global gross domestic product is expected to rise by 3.2 per cent this year and 4.1 per cent in 2004, the IMF said in its World Economic Outlook, released ahead of next week's annual meetings of the IMF and its sister institution, the World Bank.

Finance ministers and central bankers from the Group of Eight nations — the wealthy Western countries, Japan and Russia — meet in Dubai on Saturday as part of the first such high-power money summit held in an Arab country. Agenda items are expected to include rebuilding Iraq and Afghanistan and cutting off funding to terrorists.

Touring the region before arriving in Dubai, U.S. Treasury Secretary John Snow said he asked Saudi Arabia to help fund reconstruction in both countries and was ``encouraged'' by the response. The IMF's global economic forecast was unchanged from the last report in April, but it showed improvements in the U.S., Japan and elsewhere.

"For the first time in what seems a very long time, we are reasonably optimistic about seeing a return to normal growth in the global economy, or perhaps even better,'' Mr. Rogoff said.

Stock markets have shaken off some of the after effects of the bursting of the Internet bubble two years ago and the U.S. is enjoying ``the best recovery that money can buy,'' but the twin problems of a trade deficit and a mounting budget deficit will eventually cause problems, weakening the dollar, he warned. Europe is still struggling to turn its economy around, however. Strong growth in China and India foretells ``an inevitable changing of the guard in Asia,'' Mr. Rogoff said, although the value of China's currency remains a worry.

Mr. Rogoff said oil prices are expected to dip slightly next year into the $25 per barrel range, which would help most economies, though he cautioned that it's difficult to forecast the ``spectacularly volatile'' price of crude with much certainty. ``There is now good cause to be reasonably optimistic that the global economy is finally digging its way out of a very deep hole,'' he said. ``But it's certainly no time for complacency.

The recent collapse of trade negotiations in Cancun is a tragedy, not least because without stronger trade growth, global growth will eventually slow significantly, and global poverty will rise.''

World Trade Organisation members were unable to agree on a way to move forward on breaking down barriers to global trade as their latest talks collapsed on Sunday in the Mexican beach resort Cancun. The IMF outlook projected U.S. growth in 2003 at 2.6 per cent and 3.9 per cent in 2004, better than the April forecast of 2.2 per cent and 3.6 per cent. But the report sharply downgraded growth forecasts for the 12 European countries using the euro, saying the economy there would grow by only 0.5 per cent this year and 1.9 per cent next year. April's report had projected growth rates of 1.1 per cent and 2.3 per cent respectively. — AP

UNI reports:

Indian economy to grow 5.6 p.c. in 2003

The IMF said Indian economy is expected to grow at 5.6 per cent in 2003 and 5.9 per cent in 2004 and singled the country for maintaining a high per capita growth rate.

"China and India's strong growth portends an inevitable change of the guard in Asia,'' Mr. Rogoff told reporters while addressing a press conference on the release of bi-annual "World Economic Outlook: Prospects and policy issues.''

"We project China's growth at 7.5 per cent for 2003 and 2004," Mr. Rogoff said.

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