Outlook for global economy remains good while downside risks exist, IMF

International Monetary Fund (IMF) Managing Director Rodrigo de Rato said Saturday that while the outlook for the global economy remains good, there are significant downside risks.

He said U.S. economy has cooled down faster than many people expected since the IMF issued the World Economic Outlook in September which predicted the global growth rate at 5.1 percent for 2006 and 4.9 percent for 2007.

"But this has been offset by somewhat more rapid growth in the Euro area and continued strength in major emerging economies," he said at a press briefing ahead of the opening of the Group 20 finance ministers and central bank governors meeting.

He said since lower energy price and moderate long-term interest rates should also help support global economic activity, IMF's central forecast remains broadly unchanged for another year of robust and more balanced global growth.

However, there are important downside risks to growth, he said.

"One is the possibility that a further correction in the housing market could lead to an even sharper slowdown in the U.S. economy and have spillover effects abroad," he said.

The outlook for inflation also remains uncertain, he added, urging central banks to remain vigilant and act to preserve the hard-won credibility gains of recent years.

He also called for governments to take advantage of the strength of the current global economy to push ahead with the necessary fiscal adjustment.

Another risk is a disorderly unwinding of global imbalances, he said, adding IMF is engaged in a Multilateral Consultation with several of our members to discuss steps to reduce this risk.

On failure to conclude the Doha trade round successfully, he said "I strongly urge all the key players to take the bold steps needed to bring the Doha round to a successful conclusion."

Topics at the two-day meeting of the Group 20 will include world economic conditions, energy security, demographic change, climate change and IMF and the World Bank's reforms.

The Group 20 is an informal forum which first met in December in 1999 following the Asian financial crisis. The group's members represent around 85 percent of global gross domestic, product, 80 percent of world trade and two-thirds of the world's population.

Source: Xinhua