India leads the way: IMF
Wednesday, 11 April 2007, 19:30 IST
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Washington: The International Monetary Fund (IMF) has forecast continued impressive growth in emerging markets and developing countries led by India and China in 2007, even with global growth slowing mildly to 4.9 percent. "Notwithstanding the ups and downs of financial markets recently, the global economy is set for another good year in 2007," Simon Johnson, Economic Counselor and Director of Research at the IMF, said at a press conference here. However, the United States may witness somewhat slower growth, while Europe and Japan would have continued solid growth, he said describing 2006 as "another robust year for the global economy." "With growth at 5.4 percent, it was the fourth consecutive year of strong global activity. Indeed, we have not seen a four-year span like this since the early 1970s," Johnson said briefing media on IMF's World Economic Outlook (WEO) report. "You might ask, if the U.S. sneezes, won't the rest of the world catch cold?" he posed and himself responded, "Our bottom line view is that while the U.S. may indeed have sneezed, it appears to be a mild sneeze thus far, and not likely to spread." While the U.S. economy has slowed, the rest of the world has remained on track. The euro area grew at its fastest pace in six years in 2006, and the economy's forward momentum looks solid. Turning to emerging market and developing countries, Johnson said IMF expects them to continue to grow strongly this year albeit at a somewhat less brisk pace than 2006, drawing continuous support from favorable financial conditions and in many cases from strong commodity prices. China and India continue to lead the way, he said. India's broad-based expansion gathered momentum in the course of last year, running at around 9 percent, but growth should moderate some in 2007. However, spare capacity in the Indian economy remains very low, and overheating remains a risk, despite monetary policy tightening, Johnson said. Elsewhere in emerging Asia, the near-term outlook remains very positive, partly reflecting intraregional trade linkages and China's strong economy as well as prudent macroeconomic management, he said. In China, growth moderated slightly in the second half of 2006 partly reflecting measures to cool fixed asset investment from its recent rapid pace. But nevertheless, the economy is expected to grow by around 10 percent in 2007, and IMF sees risks in China to be on the upside. "It is unclear whether the Chinese economy will slow consistently in response to efforts to rein in rapid credit growth given the constraints to monetary policy posed by the tightly managed exchange rate," he said. So, by and large, things look very good. But the challenge is to sustain this remarkable record of strong global growth, Johnson said. In recent years, the combination of technological progress and increasingly open global trading and financial systems and more resilient macroeconomic policy frameworks have laid the foundation for superlative growth. "This progress is coming under pressure, and I am concerned that not enough is being done to take advantage of the current period of prosperity," Johnson said. Taking the five-year period of 2003-07 as a whole, the global economy is achieving its fastest pace of sustained growth since the early 1970s, WEO noted. The overall US economy is holding up well despite the sharp downturn in the housing sector. Investment has slowed somewhat, but consumption remains well supported by a strong labor market and healthy household balance sheets, it said. Unemployment remains low and -in most parts of the US economy-there are good prospects for sustained job growth. Even more important, the signs elsewhere are very encouraging, the report said. The euro area is experiencing its fastest growth in six years, Japan's expansion has momentum, and emerging market and developing countries, led by China and India, continue to enjoy remarkable growth, it noted.
Source: IANS
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