Global outlook good despite signs of trouble ahead

Vienna, September 12 :

The head of the International Monetary Fund (IMF) said today he predicts a ‘continued smooth ride’ for the global economy, but cautioned that there are signs of potential trouble ahead after several years of brisk growth.

“After more than three years of strong growth, the global economy today is at an uncertain juncture,” IMF managing director Rodrigo de Rato told an OPEC conference in Vienna, “Our base forecast is for a continued smooth ride for the global economy — but there are more clouds on the horizon today than we saw a year ago.”

De Rato spoke as the IMF warned in its semiannual Global Financial Stability Report that the risks of a global slowdown have increased due to higher interest rates, surging oil prices and an apparent cooling in the US housing market that could slow the US economy.

While the IMF said its general outlook on the world economy remains positive, “there are risks to the global economic outlook that have tilted to the downside,” the report stated.

Should global growth falter, international financial markets could undergo a more severe correction than the one they experienced in May and June, when emerging markets in particular were hit hard, it added.

De Rato said ‘some further tightening’ could be needed to maintain the stability of the euro, the EU common currency, but ‘policymakers can afford to move cautiously.’

He said any future interest rate increases should be gradual “since there is little danger of an inflationary surge.

“Tuesday’s report gave a general indication of the IMF’s outlook on the state of global economy two days before it releases the second part of its closely watched World Economic Outlook, wh-ich includes specific economic forecasts for the world economy and regional economies. Despite its warnings, the IMF said it sees a continuation of favourable developments, in both growth and inflation. Under this scenario, corporate earnings growth would remain healthy and default rates low.”

India opposes IMF plan :

NEW DELHI: India is opposed to a proposal by the IMF to boost voting shares for four countries, including China and South Korea, New Delhi’s representative to the instituation said.

The proposal, expected to come up for a vote at the IMF’s annual meeting in Singapore next week, seeks to increase the voting shares and financial contributions, or quotas, of China, South Korea, Turkey and Mexico. Later, it plans to rework the voting shares of the all 184 member countries.

The plan was approved by IMF’s executive board, which said the changes are necessary to recognise the rising economic might of emerging economies. — AP