MercoPress. South Atlantic News Agency

US slowdown makes China largest contributor to global growth

The International Monetary Fund raised its forecast for growth in the global economy for this year to 5.2%, up form its April forecast of 4.9%.

IMF bases its forecast on accelerating growth in China, India and Russia plus signals that the US economy may be getting back on track. China's growth forecast in 2007 has been raised from 10% to 11.2%, and for the first time it will become the biggest element in worldwide growth. "With a growth slowdown in the United States, China will be the largest contributor to global growth" said IMF Charles Collyns. China, Russia and India account for more than half of the 5.2% increase in global economic growth this year. However IMF also sent out warnings of growing inflationary pressures, especially from rising energy prices and forecasts that central banks are more likely to raise interest rates in the coming months. IMF also cautioned about risks in the financial markets partly as a result of the number of defaults in the US sub-prime mortgage market and the volatility of Chinese stock exchanges. The IMF said that while growth in the US had slowed in the first three months of the year, there are signs that it has gained momentum since then. Although it lowered its forecast for the US this year from 2.2% to 2%, it has kept the 2008 forecast unchanged at 2.8%. Meantime in United States the Federal Reserve Beige Book said the economy was growing at a "moderate" pace despite the housing slump. Growth in manufacturing and commercial property outweighed the slowdown in housing in June and July. The Beige Book is a summary of anecdotal evidence from district Federal Reserves. Figures from the National Association of Realtors showed that sales of existing homes in the US during June fell to the slowest pace since November 2002. Sales fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million homes. But the median price paid for a home rose 0.3% compared with June 2006 to 230.100 US dollars which is the first such increase in average prices for 11 months.