IMF warns of global growth danger

Rising oil prices have been a cause of concern

The International Monetary Fund (IMF) has warned that a global slowdown is looking more likely because of high oil prices and a cooler US housing market.

"There are risks to the global economic outlook that have tilted to the downside," the IMF said in a report.

It also said that the US dollar may fall unless policies on savings levels and investment imbalances were changed.

The report was released ahead of the IMF and World Bank's annual meetings in Singapore later this month.

The official IMF event does not starts until 19 September, but leaders from the Group of Seven (G7) richest nations and finance ministers are already in Singapore discussing policies.

After initial refusal, activists are being allowed to stage protests near, but not at, the event.

Turbulence

In its latest report, the IMF underlined what it saw as the biggest threats to continuing global growth.

It said that rising oil prices coupled with recent figures showing that the sale of US new homes fell by 4.3% in July - the biggest fall since February - have sparked fears of a wider economic downturn.

"The recent market turbulence is a timely reminder for authorities to strengthen macro-economic policies and persevere with needed structural reforms," said the IMF's Global Financial Stability report.

The IMF meeting often provokes strong and violent protests

"The potential for a disorderly unwinding of the global imbalance remains a concern," the report said.

At the heart of many of the fears are trading imbalances, and the IMF's report came the day after China said it had posted a record of $18.8bn (£10bn) trade surplus with the rest of the world in August.

By contrast the US, the world's largest economy, has seen its trade deficit reach over $64bn.

One explanation for this huge gap is the weakness of China's currency, which makes Chinese goods comparatively cheap, thereby boosting exports.

In its report, the IMF urged Asian nations to aim for greater exchange rate flexibility, and said Europe and Japan should improve structural reform.

Reluctant to change

As well as offering advice on changes to global structures, a key issue at the IMF's meeting later this month is expected to be how the organisation should change itself, with some critics arguing that it needs a fundamental overhaul.

Despite significant changes in the world economy since the IMF's inception over 50 years ago, critics claim that it has failed to adequately reflect this in its power structure.

This has been especially true when it comes to the voting power of developing nations such as Brazil and China, whose economies have boomed in recent years.

We are opposed to this two stage approach. Change the formula. Make it transparent and simple Indian IMF representative Bhawani Mishra

To address some of the concerns, the IMF is proposing to increase the voting power of four member states; China, South Korea, Turkey and Mexico, before looking at other nations.

India - though in favour of increasing voting rights for developing nations - is opposed to the IMF's two-tier plan.

Indian IMF representative Bhawani Mishra said that India wants to "change the formula" and making transparent and simple.

Quiet approach

IMF and World Bank meetings have attracted large, and often violent, protests in past years.

Singapore has refused to lift its ban on street demonstrations despite calls from non-governmental organisations (NGOs) and activists.

As a result, protestors opted to gather on the nearby Indonesian island of Batam instead.

After an initial refusal, Indonesian police have relented and are permitting the 1,000 or so activists to stage protests on Batam.