IMF still optimistic on growth despite risks

IMF still optimistic on growth despite risks
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First Published: Thu, Aug 02 2007. 09 40 AM IST
Updated: Thu, Aug 02 2007. 09 40 AM IST
Coolum, Australia The International Monetary Fund said on Thursday (2 August) that recent volatility in financial markets and an increase in energy costs have not been enough to change its forecasts for global growth.
“The latest market volatility has not substantially changed our outlook on the global economy,” said the IMF’s First Deputy Managing Director, John Lipsky.
The IMF’s global growth forecast stood at 5.2% for both 2007 and for 2008, Lipsky told reporters on the sidelines of the APEC finance ministers conference. The forecasts were recently upgraded from an April forecast of 4.9% for both years.
However, Lipsky acknowledged that high energy costs coupled with the recent market volatility meant the economic risks were for slower rather than faster growth.
“We perceive the risks to the economy are on the downside,” Lipsky said.
He noted that while sharemarkets have fallen the widening of global credit spreads was perhaps more important for the economic outlook.
“The realignment of risk... is not necessarily unsettling,” Lipsky said, saying lending conditions had become too easy.
The resulting readjustment in financial markets was painful for some but necessary.
Global markets have been rocked in recent weeks by the spillover from the crisis in the subprime mortgage sector to the broader credit markets.
Lipsky said there had been a pause in leveraged buyouts and it was not a surprise that the pipeline of new deals had become “clogged” because of the difficulty in obtaining credit.
Asked about the weak yen and its effect on other Asian countries, Lipsky said the IMF had discussed with Japan and would be releasing its assessment in the next few days.
The finance ministers of the 21 Asian Pacific Economic Cooperation group (APEC) have gathered in this coastal golf resort to discuss climate change, energy security and the global economic and financial imbalances. The new head of the World Bank is also attending along with the president of the Asian Development Bank (ADB).
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First Published: Thu, Aug 02 2007. 09 40 AM IST
More Topics: APEC | IMF | Economy and Politics | Indicators |