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The International Monetary Fund (IMF) has forecast continued impressive growth in emerging markets and developing countries led by India and China in 2007, even with global growth slowing mildly to 4.9 percent. “Notwithstanding the ups and downs of financial markets recently, the global economy is set for another good year in 2007,” Simon Johnson, Economic Counsellor and Director of Research at the IMF, said briefing media on IMF’s World Economic Outlook (WEO) report. Describing 2006 as “another robust year for the global economy,” he, however, said the U.S. may witness somewhat slower growth, while Europe and Japan would havecontinued solid growth. “With growth at 5.4 percent, it was the fourth consecutive year of strong global activity.
Indeed, we have not seen a four-year span like this since the early 1970s,” Johnson said “You might ask, if the U.S. sneezes, won’t the rest of the world catch cold?” he posed and himself responded, “Our bottom line view is that while the U.S. may indeed have sneezed, it appears to be a mild sneeze thus far, and not likely to spread.” While the U.S. economy has slowed, the rest of the world has remained on track. The euro area grew at its fastest pace in six years in 2006, and the economy's forward momentum looks solid.
Turning to emerging market and developing countries, Johnson said IMF expects them to continue to grow strongly this year albeit at a somewhat less brisk pace than 2006, drawing continuous support from favourable financial conditions and in many cases from strong commodity prices China and India continue to lead the way. India’s broad based expansion gathered momentum in the course of last year, running at around 9 percent, but growth should moderate somewhat in 2007. However, spare capacity in the Indian economy remains very low, and overheating remains a risk, despite monetary policy tightening, Johnson said.
Elsewhere in emerging Asia, the near-term outlook remains very positive, partly reflecting intra-regional trade linkages and China's strong economy as well as prudent macroeconomic management, he said. In recent years, the combination of technological progress and increasingly open global trading and financial systems and more resilient macroeconomic policy frameworks have laid the foundation for superlative growth. “This progress is coming under pressure, and I am concerned that not enough is being done to take advantage of the current period of prosperity,” he said.
During 2003-07, the global economy is achieving its fastest pace of sustained growth since the early 1970s, WEO noted.
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