World Economy Will Grow Despite Oil Crisis, Says IMF

21 April 2006

In its latest forecast of global growth, the International Monetary Fund predicts the world economy will expand by 4.9% this year - even in the face of recent natural disasters and the continuing rise in oil prices.

Its latest bullish World Economic Outlook revises upward an earlier growth forecast of 4.4%, although the body warns that an ongoing rise in the price of oil could imperil further global expansion.

Declares the IMF: "Notwithstanding higher oil prices and natural disasters, global growth has continued to exceed expectations. Looking forward, the baseline forecast is for continued strong growth, although risks remain slanted to the downside."

Ongoing expansion in China, India and Russia largely accounts for the IMF's optimism in the current year. The former's booming economy is expected to grow by 9.5% this year (up from a previous estimate of 8.2%), easing back slightly to 9% in 2007.

The (by comparison) torpid USA - still the planet's largest economy - will see growth of 3.4% this year and 3.3% in 2007, marginally down on 2004's 3.5%.

Slower yet is the Eurozone economy, in which the pacemakers are Germany and France. This is set to grow by 2% this year, but fall back to 1.9% in 2007; whereas the UK, which remains outside the Eurozone, can look forward to slightly better growth prospects of 2.2% this year and 2.7% next.

According to the IMF, the impact on the world economy of higher oil prices has been "more moderate than generally expected" - the main reason being that inflation among most of the leading economies is seen to be under control.

But many onlookers worry that price inflation has been held in check only by massive Western imports of low-priced goods from China and elsewhere in the eastern hemisphere.

They fear that some time soon the USA's massive trade imbalance and level of consumer debt will pose a greater threat to global trade stability than inflation.

Data sourced from BBC Online; additional content by WARC staff