Resilient global economy faces uncertainties
| Author | Marina Primorac |
| Position | IMF External Relations Department |
| Pages | 273-282 |
Page 273
The global economy is expected to record a fourth straight year of strong growth, with dynamic Chinese and Indian economies helping offset an expected slowing in the U.S. economy. Outgoing IMF Economic Counsellor Raghuram Rajan, presenting the latest World Economic Outlook projections, said strong world growth of 5.1 percent in 2006 is expected to moderate slightly to 4.9 percent in 2007, but risks to the outlook are clearly tilted to the downside.
Page 281
The September 2006 World Economic Outlook (WEO) projects strong global growth of 5.1 percent in 2006, slowing slightly to 4.9 percent in 2007, both numbers up from the WEO's spring forecast. Growth is becoming more balanced, Raghuram Rajan, Director of the IMF's Research Department, said when presenting the WEO projections at a press conference on September 14 during the Annual Meetings in Singapore. The U.S. economy is beginning to slow; emerging markets and developing markets, led by China at 10.0 percent and India at 8.3 percent, are delivering impressive growth rates; the euro area has gained momentum; and Japan's expansion continues. However, after four years of strong growth, risks to the outlook are clearly tilted to the downside.
Rajan, who has announced that he will return to the University of Chicago in early 2007, took the opportunity of his final WEO press conference to talk about the main medium-term risk to growth: not enough is being done to support the worldwide growth in productivity (see chart). The information technology revolution and increased global competition fostered productivity growth in the past, but now political support is fading in the face of popular discontents, strengthened by rising inequality.
"The collapse of the Doha Round, the rising tide of economic nationalism coming in the way of cross-border mergers, and the strengthening of resistance to immigration," Rajan said, all point in the same direction. "In the name of national advantage-an attitude of me, my, mine," Rajan cautioned, "politicians are once again ensuring collective disadvantage. The strong world economy we enjoy today is because policies to enhance competition, economic sustainability, and flexibility were implemented in the past...
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