Asia, US to buoy global growth, says IMF
By Emad Mekay
WASHINGTON - The world economy will rebound in 2004 and 2005, buoyed by an increase in global trade and surging economies in Asia and the United States, but growth in developing nations will ease slightly, the International Monetary Fund (IMF) said on Wednesday.
In its high-profile World Economic Outlook, published twice a year, the international lender predicted that global growth will hit 4.6 percent in 2004 and fall slightly to 4.4 percent next year.
The US and Asia, particularly China, led growth over the past year, says the IMF. Asia is expected to improve to 7.2 percent growth in 2004, its highest level since before its 1997 financial crisis, thanks in particular to recovery of the information-technology sector. China's economy will expand by 8.5 percent next year, with India growing 6.8 percent this year and 7.4 percent in 2005.
Developing-country economies, which grew by 6.1 percent in 2003, will increase by 6 percent this year and by 5.9 percent in 2005.
"The tentative buds of the recovery we observed six months ago are now blooming in many parts of the world," Raghuram Rajan, chief economist at the Washington-based institution, told reporters.
But the IMF warned that the positive assessment is still fraught with "geopolitical risks", including possible terrorist attacks, tensions in the Middle East and US-occupied Iraq, and fluctuating oil prices.
The agency calculates that for every US$5-a-barrel rise in the cost of oil above the baseline price - if it remains in place for one year - global growth declines by some 0.3 percent. Oil prices have jumped from $26.50 a barrel in September to $34 a barrel in mid-April.
"It is worrisome that supply conditions are not slack enough to withstand the withdrawal of a significant producer," Rajan said.
The IMF also warned that the current fiscal deficit in the United States, combined with similarly serious deficits in Asia, remains a threat to global recovery. "On the fiscal side, the United States is not the only economy that needs to consolidate, but it is the most important," said Rajan.
Growth in Latin America, especially Brazil, remains weak, but higher commodity prices and the global recovery will help turn that around, according to the IMF, which will hold its spring meetings in Washington this weekend, in conjunction with the World Bank.
The Middle East will see slightly higher growth this year, at about 4.1 percent, versus 5 percent in 2005, while the former Soviet republics will grow 6 percent in 2004, underpinned by robust upturns in Russia and Ukraine.
Among the world's poorest countries, growth in 2003 rose by 4.4 percent, lifted by the surge in oil production and oil prices in Nigeria. It should increase another 5.9 percent in 2005, on the back of better weather conditions, improving commodity prices and increasing oil and gas production in many African countries, predicts the outlook.
US growth is projected at 4.6 percent in 2004, while the Japanese economy is expected to grow by 3.4 percent, its highest rate since 1996. Europe, which has seen the slowest pace of recovery because consumption remains weak, will grow a modest 1.7 percent, according to the IMF.
As the IMF forecast was released on Wednesday, a couple of hundred protesters demonstrated outside its headquarters in Washington. Critics say the fund and the World Bank exacerbate global poverty by pushing policies that favor corporations in rich nations and pry open the fragile markets of developing states.
The forecast is packed with the usual advice for poor nations. It urges them to open their borders to more trade and to continue overhauling their banking and corporate sectors.
The annual outlook has been criticized for gauging the health of the world economy from the perspectives of nations that dominate the IMF's executive board - northern countries - and for making no provision for human development.
In 2003, economists and activists from the so-called global justice movement that opposes corporate-led globalization issued their first "Real World Economic Outlook". Published by Jubilee Research at the London-based New Economics Foundation, the report presented an alternative view to the one offered by the IMF and other Western-backed custodians of the global economic system.
The alternative outlook said the "trickle down" effect promised by the IMF and World Bank - a theory that says the benefits of economic growth will flow from the richest to the poorest - has not materialized. Instead, poor countries are lenders to the rich - unwittingly financing opulent living standards in the United States and elsewhere.
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