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Imf predicts strong growth Original Source Link: (May no longer be active)
http://www.usatoday.com/money/economy/2004-09-29-imf-outlook_x.htmhttp://www.usatoday.com/money/economy/2004-09-29-imf-outlook_x.htm
IMF: World economy set for strongest growth in 30 years
WASHINGTON (AP) — The global economy should register its strongest growth in 30 years in 2004 despite soaring oil prices, which are expected to restrain the U.S. expansion a bit, the International Monetary Fund said Wednesday.
In it latest World Economic Outlook, the IMF boosted its forecast for global economic growth to 5% for all of 2004, up from an April estimate of 4.6%. Should the projection prove accurate, it would mark the strongest growth since 1973, an IMF spokesman said. It also would be a considerable pickup from 2003, when global economy expanded by 3.9%.
The IMF said global growth has been helped by factors including rising corporate profitability, improved stock markets, strong housing markets and gains in employment.
While the new 2004 projection is encouraging for the global economy, which has been battered by recession, terror attacks and war, sharply rising oil prices are still of concern, the IMF said.
The higher growth projection comes even as the U.S. economy, after growing briskly in the first three months of the year, lost momentum in the second quarter as surging energy prices made consumers — the economy's lifeblood — turn cautious and less willing to spend. Private economists, meanwhile, are hoping the U.S. economy will pick up speed in the last six months of the year.
"This is a soft patch, not a sink hole," the IMF's chief economist, Raghuram Rajan, said of the late spring slowdown.
Against this backdrop, the IMF predicted the United States will see its economy grow 4.3% this year, down from an earlier estimated increase of 4.6%. Even so, the new projection would represent the best showing since 1999 and would be up from 3% in 2003.
The health of the U.S. economy is a prominent issue in the presidential campaign. President Bush credits his tax cuts for helping the economy rebound from the 2001 recession. His Democratic rival, John Kerry, counters that the tax cuts mainly helped the wealthy, squeezed the middle class and have plunged the government's balance sheets deeper into red ink.
For 2005, the global economy is expected to see slower growth, expanding 4.3% compared with the 4.4% estimate made in April. .
"Looking forward, the global expansion — while still solid — will therefore likely be somewhat weaker than earlier expected," the IMF said. "The balance of risks has shifted to the downside with further oil price volatility a particular concern."
Crude oil prices on Tuesday surpassed $50 a barrel for the first time but ended the day at $49.90 a barrel in trading on the New York Mercantile Exchange.
The IMF's forecasts are based on an assumption that oil prices would average around $37.25 a barrel this year and next.
Still even with oil prices in the $50 a barrel range, "we don't think the effect will be huge," said Rajan. He said that big developed countries, including the United States, are better now than in the past with dealing with oil price jumps and that central banks have gained greater credibility in combating inflation.
Adjusting for inflation, oil prices are still about $30 a barrel below the level reached in 1981 after the Iranian revolution.
Nonetheless, Treasury Secretary John Snow said he would raise concerns about oil prices at Friday's meeting of financial officials from the world's richest countries.
The IMF also believes the United States will see slower growth in 2005 compared with 2004. The IMF is predicting the U.S. economy will increase by 3.5% next year. That is down from an April projection of 3.9% and would mark a deceleration from the estimated 4.3% growth for 2004.
Copyright 2004 The Associated Press.
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