Global growth to continue, but imbalances widen
| Pages | 113-123 |
Page 113
The IMF's latest World Economic Outlook sees the global economy continuing to perform strongly. Global growth is projected at 4.9 percent for 2006, reflecting higher estimates for China, India, and Russia and increasing optimism on Japan. Downside risks predominate, however, given the tightness of oil markets and widening current account imbalances.
IMF Economic Counsellor Raghuram Rajan urged policymakers to use the current benign environment to pursue vigorous reform.
Page 122
On the strength of higher growth estimates for China, India, and Russia and of increased optimism on Japan, the IMF has added 0.6 percentage point to its 2006 global growth projections in its latest World Economic Outlook.
It now projects that the world economy will grow by 4.9 percent this year, compared with its projection of 4.3 percent last September.
In an April 19 press briefing, IMF Economic Counsellor Raghuram Rajan lauded the global economic performance (see chart), pointing out that 2006 would be the fourth consecutive year of growth above 4 percent and that growth has become more balanced regionally-a particularly welcome development.
The world, he said, can honestly be told that it has "never had it so good." Tight oil markets, widening imbalances, and mounting pressures on interest rates, however, keep risks tilted to the downside. Most troubling, he said, is the "growing implementation deficit." Far too little is being done in far too many places, and Rajan worried that politicians all over the world were frittering away a golden opportunity to make the kind of adjustments that would allow their economies to keep pace with an increasingly integrated and more competitive world.
For the advanced economies, 2006 holds the prospect of moderating growth in the United States, continued robust growth in Japan, and more traction in the euro area's expansion.
In the United States, growth in the first quarter of 2006 is likely to have rebounded from the sluggish fourth quarter in 2005, and growth for this year as a whole is projected at 3.4 percent, a slight drop from last year's 3.5 percent. Downside risks remain-notably uncertainties surrounding the continued financing of a widening U.S. current...
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