IMF tips robust growth in world economy

Washington - World economic growth is set to power ahead through 2006, well above long-term averages despite concerns about rocketing energy costs, a leaked copy of the International Monetary Fund's twice-yearly World Economic Outlook shows.

Citing an advance copy of the report, due to be published by the IMF next week, German newspaper Handelsblatt said the fund would cut its global growth forecast for 2006 to 4.3 per cent from the 4.4 per cent rate it expected in April.

It retains its 4.3 per cent call for 2005.

A 4.3 per cent growth rate this year and next would see the world economy still expanding at almost half a percentage point above the 3.9 per cent average of the past 10 years.

The forecast also exceeds relatively bullish forecasts from banks such as Goldman Sachs, which sees 4 per cent world growth this year and next.

And it is almost a full percentage point above the outlook from gloomier Washington-based think tanks such as the Institute for International Economics, which expects the world economy to slow to 3.5 per cent in 2006.

Handelsblatt said the IMF expected economic activity next year to be dampened by high oil prices following Hurricane Katrina.

But the net impact on its forecasts appears slight.

A senior IMF official quoted by the paper said that risks to the outlook were rising despite robust growth.

"Although the global economy is still expanding at a satisfactory rate, risks have increased," he said.

IMF managing director Rodrigo Rato said the effects of Katrina would have only a short-term impact on the overall US and world economies.

"We don't see an economic problem here, we see a human problem," Rato said in New York this week.

He added that he saw no need for the US Federal Reserve to change the rhythm of monetary tightening due to the effects of the hurricane.

Gerd Haeusler, the IMF's director of international capital markets, echoed this view in Frankfurt and said the strength of global financial markets and systems meant shocks such as Katrina could be absorbed.

He also said the world's major central banks needed to end their super-loose monetary policies as soon as they determined their economies could cope with higher interest rates.

"I have been urging monetary authorities to change, and the US has done it, and one year after there has been no detrimental effects."

IMF and World Bank six-monthly meetings are next weekend.

- Reuters