IMF Chief: World Expansion To Extend Into Fifth Year

Predicts 4.9% global growth in 2007.

IMF chief Rodrigo Rato said Jan. 16 the world economy remains robust with the U.S. set for a "soft landing" and China extending its breakneck expansion. But there remain risks of a "disorderly adjustment" in the global economy, with Asian currency rates still too rigid and oil prices remaining volatile, the International Monetary Fund managing director said.

"After four consecutive years of strong growth, we expect that global growth will remain solid in 2007, approaching 5% for the year," Rato said. The IMF official forecast predicts global growth this year of 4.9%.

"Economic recovery in Europe has broadened, and growth in Japan is broadly on track after an earlier soft patch, " he said. China is set for another year of growth above 10%, the IMF chief said, while urging Beijing to take more measures to rein in unproductive investment. Rato reaffirmed that China should open up its financial markets and currency regime more, "to allow market forces to determine prices and allocations of resources in the Chinese economy more freely."

East Asian economies in general are highly competitive and do not need their "heavy reliance" on managed exchange rates, the IMF chief said.

As China and other Asian countries have run up massive trade surpluses on the back of export-led growth, deficits in the U.S. have been mounting to record levels. That has created concern that the world economy is dangerously out of kilter, prompting Rato to set up a new surveillance mechanism for major nations to discuss how to redress the imbalances under IMF auspices.

Copyright Agence France-Presse, 2007

TAGS: Trade
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