IMF: World economy faces greater risks

Updated: 2007-12-13 16:37

WASHINGTON - The world economy has maintained rapid growth in 2007 but will face greater risks in the coming year, according to analysis of the latest World Economic Outlook from the International Monetary Fund (IMF).

IMF: "Relatively strong global growth performance will continue"

In 2007, the robust economic development of the newly-emerged markets, especially in Asia, has largely offset the slowdown in economic growth of the United States and its economically-related countries stemming from the US subprime mortgage crisis and subsequent world financial market unrest.

"The expansion is projected to remain above the long-term trend, not withstanding recent financial market turbulence, with emerging markets and developing countries leading the way," the IMF said.

Global economic growth has been faster, broader and more stable since 2004 than at any time in the previous 30 years. Between 2004 and 2006, global economic growth remained at a stable 3.25 percent. Improved monetary and fiscal policies have helped underpin growth and stability, the IMF report said.

The world economy is expected to expand by 4.8 percent next year after a 5.2-percent pace projected for 2007, thanks to generally sound fundamentals and the strong performance of the emerging market economies, the IMF said in its report.

According to IMF's predictions, the economic growth of Asia's developing countries, including China and India, will reach an impressive 9.8 and 8.8 percent in 2007 and 2008 respectively, with China's growth rates reaching 11.5 percent and 10 percent in the two years, and India's 8.9 and 8.4 percent respectively. Some sub-Sahara African countries have also embraced their fastest developing period in more than 40 years.

Emerging market economies, like China, India and Russia, have become "a source of stability in the global economy," said RodrigoDe Rato, chairman of the Executive Board and Managing Director of the IMF. "These countries have weathered the financial turbulence relatively well, partly because global growth has been strong, and domestic macroeconomic police-making has improved, though vigilance is still needed," said the report.

The global economy is increasingly reliant on those newly-emerged economies, with 50 percent of the global economic growth in 2007 coming from the above-mentioned three countries.

IMF: "Yet a global economic slowdown is likely to occur amid greater risks"

However, the financial turbulence worldwide and surging oil prices have cast a shadow on world economic development, increasing its future risks.

"Last year we met at what I called a time of opportunity, but today we meet at a time of uncertainty," said Rato at the IMF and World Bank annual meetings in October. Now people are widely concerned about whether the world economy has reached a "crossroads" or not, he said.

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