IMF is predicting growth despite inflation, oil turmoil

Posted: April 12, 2011

WASHINGTON - Even as the global economy faces new threats from surging oil prices, Mideast turmoil, higher inflation in China, and Europe's debt woes, the recovery from the steep recession won't be derailed, the International Monetary Fund said Monday.

In a new economic forecast, the IMF said the global economy should grow 4.4 percent this year. That compares with global growth of 5 percent last year.

The IMF projects industrial countries will grow 2.4 percent, while developing countries, a group that includes China, will grow more than twice as fast at 6.5 percent.

"The world economic recovery is gaining strength, but it is unbalanced," Olivier Blanchard, the IMF's chief economist, told reporters.

He said it would be critical for countries running large government deficits such as the United States to make progress in getting those deficits under control. At the same time, countries with large trade surpluses, such as China, will need to do more to boost domestic demand and not rely so heavily on exports to generate economic growth.

The IMF's new growth forecast was prepared for spring meetings, to start Saturday, of the 185-nation IMF and its sister lending agency, the World Bank.

The finance officials will try to assess how big a threat the rise in energy and food prices will be and also what they can do collectively in response to the political turmoil in the Middle East and North Africa.

In 2009, the global economy shrank by 0.5 percent, its worst downturn since World War II.

The 2.4 percent growth forecast for the advanced economies was down 0.1 percentage point from January.

"New downside risks are building on account of commodity prices, notably oil, and relatedly, geopolitical uncertainty as well as overheating and booming asset markets in emerging market economies," the IMF said.

Growth in the United States was forecast to be 2.8 percent, down 0.2 percentage point from January, reflecting primarily the drag from higher oil prices.

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