IMF increases global economic growth predictions

The world economic growth is forecasted to be higher at 5.1% in 2006 and 4.9% in 2007, the International Monetary Fund (IMF) has said in the report released at the start of the IMF and World Bank's annual meetings in Singapore, APA reports.

The forecasts are both some 0.25 percent up on the IMF outlook given in April.

Economic growth was 4.9 percent in 2005.

IMF also warned that global imbalances pose risks –especially triggered by the US budget deficit of USD 64bn and China's trade surplus of $18.8bn. Surpluses in oil producing countries will remain high and the eurozone economy will continue to improve. Germany's economy, Europe's largest, will grow 2 percent this year, up from 1.3 percent projected in April.

The expansion in this country will slow to 1.3 percent in 2007, due to an increase of VAT to 19%. US economic growth would slow from 3.4% to 2.9%. The U.S. expansion will cool as the slowdown in housing curbs consumer spending in the world's largest economy.

One reason for this economic imbalance is the weakness of China's currency, that makes Chinese goods reasonably cheap, thereby boosting exports. Japan's economy, the world's second largest, will expand 2.7 percent this year.

The increase in the forecasts reflects faster-than- anticipated growth in China, India, the 12-member euro area, the U.K. and Russia.

In general, Asian economy is predicted to continue to grow.
The IMF called on central banks to weigh up the risks of growth and inflation, saying some more interest rate tightening might be necessary.

The World Economic Outlook (WEO) presents the IMF staff's analysis and it is usually prepared twice a year.