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Thursday, 11 January, 2001, 16:06 GMT
IMF warns of slowdown
Horst Köhler, managing director of IMF
Köhler will advice Japan on how to avoid another recession
The head of the International Monetary Fund has warned that the US economy will slow significantly in 2001, dragging down growth in the rest of the world.

Hans Koehler says that the US recession will be a "short, shallow decline" but that talk of a soft landing may be overdone.

He added that "the soft landing will be as soft as you may like - it will be bumpier."

The IMF is predicting that economic growth in the US will slow to 2.5% this year, compared to more than 5% in the first half of 2000.

And that could slow global growth by more than 1%.

However, other forecasters are more pessimistic about the US.

A recent survey of US business economists said that they were predicting a growth rate of just 1.9% in the first quarter of the year.

Fears about a US recession led the US central bank, the Federal Reserve, to cut interest rates by 0.5% last week.

And the incoming Bush adminstration is considering accelerating its planned tax cuts to help stimulate the economy.

Warnings on reform

Mr Koehler is expected to call for rapid structural reform of the Japanese economy when he meets the media at the country's national press club on Friday.

During his whirlwind tour of Asia, he has been calling for a speeding up of economic reform to counteract the effects of the US slowdown.

Growth in Asia's export oriented economies - of which Japan is a key one - will suffer as a direct consequence unless they develop clear and decisive policies to insulate their economies, he is expected to say.

About 20% of Asia's exports goes to the US.

Slow growth in Asia

The IMF predicts that the Japanese economy will expand at a rate of between 1.5% and 1.8% as it struggles to emerge from ten years of recession.

That is much slower than the predicted growth rate for the region as a whole.

The IMF does not have a revised estimate of growth rate for Asia.

But Morgan Stanley Dean Witter predicts that the region will see growth of 5.8%, down from 6% in 2000.

Koehler has spent much of his Asia tour stressing the importance of safeguarding the global economy, rather than focusing on single issues.

Globally, growth for 2001 will be at least 3.7%, a notable slowdown from nearly 5% in 2000, according to IMF predictions.

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