The global economy will remain „strong” this year as Europe and Asia compensate for a slowdown in the US, International Monetary Fund Managing Director Rodrigo de Rato said.
„We are moving into another year of strong growth,” de Rato told reporters in Basel, Switzerland. „We certainly see strong growth in Europe, a continuation of growth in Japan and we see very strong growth in many emerging economies.” Central banks in Europe and Japan are poised to raise interest rates this year as rising business confidence, investment and hiring stoke inflationary concerns. While a housing slowdown is cooling growth in the US, unemployment in Germany last month dropped the most since 1990 and business confidence in Japan rose to a two-year high. The IMF head said a US slowdown won’t be severe enough to derail the global economy. „From the point of the view of the US, our central view is certainly a soft landing, which is of benefit not only for the US but also for the world economy,” said de Rato.
The Washington-based lending in September forecast the global economy would expand 4.9% this year, down from 5.1% in 2006. De Rato today declined to say whether he planned to revise those projections. Investors and executives should nevertheless avoid „complacency” as „ample liquidity” in the global economy helps boost asset prices in parts of the economy and reduces the price of risk, according to the de Rato. He also said the price of oil, which has gained almost 25% in the past two years, poses an „inflationary risk” to parts of the global economy.
The European Central Bank will probably raise its key lending rate to 3.75% by the end of the year, according to the median of 23 forecasts in a Bloomberg survey of economists published January 5. Economists expect the Bank of Japan to take its benchmark rate to 1% by the end of 2007 from 0.25% at present, according a survey published December 21. In the US, the Fed will probably keep its benchmark at 5.25% this quarter before cutting it to 4.75% by the end of 2007, the median of 74 forecasts in a separate survey in December showed. (Bloomberg)