WB, IMF warn of slower growth

WB, IMF warn of slower growth

Agence France-Presse, Washington

Economic growth in developing Asia is expected to slow down
through 2006 after the fastest expansion in a decade in 2004, the
World Bank said on Wednesday with a warning that tightening
global conditions could test the region's resilience.

East Asian economies are poised to expand by 7.4 and 6.9
percent in 2005 and 2006 respectively after a blistering 8.3
percent last year while South Asian nations could grow 6.2 and
6.4 percent over the next two years after chalking up 6.6 percent
in 2004, according to the bank's annual Global Development
Finance 2005 report.

The slower growth is in line with global trends.

According to the Washington-based bank, rising interest rates
and high oil prices, combined with the waning of the fiscal
stimulus that has supported expansion in the recent past, should
continue to dampen world growth.

As a result, global economic activity is projected to slow
fairly sharply in 2005 before stabilizing in 2006 and picking up
somewhat in 2007, it said. Global economic growth hit 3.8
percent in 2004, with developing countries recording their
fastest growth in more than a decade, the report said.

Francois Bourguignon, World Bank chief economist, warned of
the risks of "disorderly exchange rate movements, or of interest
rate increases" that could dampen financial inflows.

"Developing countries need to prepare themselves for
adjustments, some of which could be sudden," he said.

In South Asia, the bank said, notwithstanding a less benign
external environment, regional growth could expand by about 6.5
percent a year through to 2007.

"The more balanced growth that characterized the region in
2004 is expected to continue with domestic consumption and
investment providing the largest contributions to growth," it
said.

Southeast Asian economies, whose growth fell from 7.8 percent
in 2003 to 6.6 percent last year, are expected to expand at a
slower pace of 6.2 percent this year, 6.4 percent in 2006 and 6.7
percent in 2007.

In a separate occasion, International Monetary Fund chief
Rodrigo Rato warned on Wednesday that the poor state of U.S.
finances coupled with rising interest rates and high oil prices
are a menace to global growth.

But it is not for the U.S. government alone to rebalance the
world economy, Rato said in a speech at Georgetown University
here ahead of the annual spring meetings of the IMF and the World
Bank in mid-April.

In particular, Europe and Japan must do more to shore up their
legs of the global system to prevent growth being "unduly
dependent on the United States and China", the Fund's Spanish
managing director argued.

There was also the need for "greater exchange rate flexibility
in China and emerging Asia, supported by financial sector
reforms", Rato added.

The IMF has joined calls by the United States and EU for China
to relax its currency peg to the dollar, to address concerns that
Chinese exporters are booming on the back of an artificially
cheap yuan.