MercoPress. South Atlantic News Agency

World expansion in 2005 estimated in 4,3%

Surging oil prices plus the world economy's growing misbalances have put a break on growth expectations for many countries, indicates the IMF World Economic Outlook, although it insists in an overall 4,3% expansion forecast for 2005.

The World Outlook which was made public Wednesday in Washington underlines that the global expansion forecast is based on United States and China's continued dynamism since the outlook for Japan and the European Union are disappointing with estimates downgraded in most of member countries. US is forecasted to grow 3,6% in 2005 and China from 9,5% in 2004 will achieve 8,5% in 2005 and 8% in 2006.

The report points out to slight indications of growth in the Euro zone, but the 2005 thrust is considerably less than expected, particularly since the German economy, based 75% on exports, needs urgently a boost of domestic demand. Germany's growth forecast was reduced from 1% to 0,8% in 2005.

Spain apparently will grow 2,8% in 2005 and 3% next year, both below original estimates.

Crude prices remain a threat for world growth given the insufficient world reserve capacity and growing demand from China and India. IMF considers 54 US dollars pb a "realistic" price on which to work with this year.

The other threat looming is the US growing balance of payments deficit which in 2004 reached a record 5,7% of GDP.

"If record deficits in the US persist, we should not discard a more pronounced drop in the value of the US dollar" says the report regretting the lack of political will to address the issue with "consequences more serious and painful" if nothing is done.

The IMF report insists that US must increase its savings rate and doubts that the federal budget deficit will be cut to half in 2009 as has been indicated by the Bush administration, a "none too ambitious target". US budget deficit stands now, and growing, at 3,6% of GDP.

Regarding Asian countries, which have an enormous trade and services surplus IMF recommends revaluation of their currencies.

Europe must push for structural reforms and suggests that the Euro zone could live with lower interest rates if the economy doesn't really take off.

Japan's growth estimate for 2005 has been reduced from 1,5% to 0,8%.

Russia which reported a strong expansion in 2004 is forecasted to slow down with 6% in 2005 and 5,5% in 2006.