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The BBC's Richard Quest in New York
"The only risk to the global economy is that it could grow too fast"
 real 28k

Wednesday, 12 April, 2000, 16:42 GMT 17:42 UK
IMF hails world recovery
An IMF press conference
Michael Mussa, centre, makes a point
The global economy has staged a "remarkable turnaround", the International Monetary Fund (IMF) says in its twice-yearly report.

The IMF says the world economy is on track to grow 4.2% this year, compared with 3.3% last year, marking a strong recovery from the Asian crisis.

The IMF forecasts strong economic performance in almost every region of the world, except Japan, where the recovery is expected to be "tentative and fragile".

A few things could upset the economic applecart, the IMF warned.

Inflation warning

A build up in inflationary pressure could lead to higher US interest rates, a plunge in the stock market and a mild recession next year.

The IMF added that there was "little evidence of US growth slowing of its own accord".

"It is becoming a matter of urgency to secure a smooth transition to a more sustainable pattern of global growth," the IMF said.

"The priorities in this regard are to contain excess demand pressures in the United States ... and to promote robust and durable economic expansions in Japan and Europe," it added.

Asian recovery

Research chief Michael Mussa told a press conference that further interest rate rises were likely to be needed in the US to slow economic growth to a sustainable level.

This was likely to see rates peaking at 7% later this year, he said.

But he warned that low commodity prices and unusually low wage growth may have "artificially suppressed" inflationary pressures "in which case a more dramatic tightening of monetary policy may be called for".

The Asian recovery appears to be strong, with South Korea posting growth of 10.5% last year.

This year, South Korea, Hong Kong, Malaysia and Singapore are all expected to post growth of about 7%.

The Asian recovery has been driven largely by exports to the US and Europe, the IMF added.

Russia, the fund's largest single borrower and one of the hardest hit by the Asian crisis, also recovered last year.

It saw growth of 3.2%, the IMF noted, but this was based on higher energy prices and may not prove to be sustainable.

It warned that more work was needed to build a market economy.

IMF success?

The IMF had previously come under fire for the policies it enforced in countries hit by the Asian crisis.

Its critics claimed that the policies created poverty and hardship in many emerging economies, while investors who had lent money recklessly escaped scot-free.

It now claims that the turnaround can be attributed to the success of these policies.

But the gap between rich and poor continues to widen, despite the world's increasing prosperity.

One fifth of the world's population, some 1.2 to 1.3 billion people, now live on a dollar a day or less.

"As a result, the world is entering the 21st century with the largest divergence ever recorded between rich and poor," the report said.

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See also:

12 Apr 00 | Business
IMF attacks Brown's Budget
23 Mar 00 | Business
Growing row over IMF role
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