MercoPress. South Atlantic News Agency

IMF forecasts 5% global growth in 2006

The world's economy is poised to expand 5% in 2006 but at the same time the risks of higher oil and commodities prices have advanced, warned International Monetary Fund Managing Director Rodrigo Rato.

"In 2006 world growth has been strong, approximately in the range of a round 5% figure with ample geographic components", underlined Mr. Rato during an informal meeting Tuesday with journalists in Washington a week before the official IMF autumn prospects are made public.

Last April IMF estimates still forecasted 4.9% growth this year and 4.7% in 2007.

Regarding the United States economy which has been performing with great dynamism, Mr. Rato said IMF "believes there will be a moderate expansion evolution, although at a more sustained rhythm", although he did not advance any percentages.

"But what is certain is that the US economy will continue to contribute to world expansion", he said.

Rato also anticipates a rebound of the European and Japanese economies, "particularly Japan", as well as a sustained performance from China and India which have become the world's economy "most dynamic engines".

However Mr. Rato warned about growing risks from soaring prices of energy and commodities.

"The risk of inflationary pressures, although some of them have not clearly materialized, continue to be a crucial issue for those responsible of monetary policies", said Rato who invited world leaders to "remain extremely vigilant to these effects".

Another area of concern is protectionism, "all countries must resist them and the relaunching of trade negotiations has become more urgent than ever".

Finally Mr. Rato praised governments of emerging economies for having adopted "flexible exchange rates", including Asian markets.

He said that a closer IMF monitoring of flexible exchange rates was needed to ensure they are not used as an instrument to distort the global economy.

"Fixed exchange rates don't necessarily have to be a distorting element, but it's something we need to consider case by case", admitted the IMF managing director.