IMF sees world economy growth at 4.9% in 2006, 4.7% in 2007
WASHINGTON.– The global economy is on track for another couple of years of solid growth despite high energy prices and the risks stemming from large global imbalances, the International Monetary Fund said Wednesday in its World Economic Outlook.
The United States and China continue to be the main engines of growth, but the economy is improving in both Western Europe and Japan as well, the IMF said. The risks are largely to the downside, the IMF said. The main challenge remains the large imbalances in the current accounts of the United States, China, emerging Asia and the oil-exporting nations.
In the United States, "the overall risks to the outlook are slanted to the downside," the fund said. With a current account deficit of 6.4 percent of gross domestic product, the US is "vulnerable to a swing in investor sentiment that could put downward pressure on the dollar and see a spike in long-run interest rates."
"The recovery in Europe appears to be strengthening," the fund said. "Looking forward, the expansion will continue to depend on strong global demand." The European fiscal policy "remained insufficiently ambitious," the report said. Raising growth rates and reducing unemployment "requires fundamental reforms." Unfortunately, "achieving a public consensus for implementing reforms, has, however, proven more difficult, as recent events in France underscore" the report said. The fund urged Europeans to study the various approaches used on the continent to balance labor market flexibility with effective social safety nets.
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