IMF expects global economy growth of 4.3 percent

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The International Monetary Fund expects the world economy to grow by 4.3 percent this year and next year, according to its semi-annual World Economic Outlook released on Wednesday. This prediction is a cut from an earlier-expected 4.4 percent growth next year but earlier forecasts for this year were retained. The expected growth for both 2005 and 2006 is above the ten year average of 3.9 percent growth per year. The IMFs chief economist, Raghuram Rajan called the global economy tremendously resilient, but the report warned that there were risks posed to it by such circumstances as lack of savings by governments, widening current accounts imbalances, distortions of growth between regions of the world, and rising oil prices. Mr. Rajan specifically warned that higher oil prices could cause inflation and higher interest rates. The report forecast that the US economy would grow by 3.5 percent in 2005 and by 3.3 percent in 2006. Earlier, the IMF had expected US growth to be 3.6 percent this year and next. The report criticized the George W. Bush administrations plans for cutting the US budget deficit as unambitious. In other areas of the world, the IMF forecast growth of 2 percent by the Japanese economy, up from an earlier prediction of 0.8 percent growth; the economic growth projection for the eurozone was lowered to 1.2 percent this year and 1.8 percent in 2006; Chinas economy is predicted to grow by 9 percent this year, above earlier projections of 8.5 percent, and to grow by 8.2 percent in 2006.