The International Monetary Fund expects global economic growth in 2011 to be just slightly slower than last year’s rate of 4.75 per cent, its deputy managing director said on Monday.
“I can confirm 2011 global growth is expected to be only slight slower than 4.75 (per cent) last year,” IMF first deputy managing director John Lipsky, said at the OECD’s Latin American Forum in Paris.
Lipsky said the growth was “impressive” given the 10-20 year averages for global growth were about 3.5 per cent, but said that much of the growth was due to emerging markets.
“Emerging economies have represented the driving force of the post-crisis global expansion: strong domestic demand – buoyed by an accommodative policy stance and renewed inflows of foreign capital – has powered a very robust recovery, even providing some boost to advanced economies,” he said.
However, he warned that despite the pace of growth, future economic expansion faced three downside risks.
“The links between financial stresses and fiscal sustainability –especially in the euro area — have the potential to undermine growth,” he said.
“The lack of progress in formulating credible medium-term fiscal consolidation plans in many advanced economies, that could weaken confidence and push up long-term interest rates; and high commodity and food prices, that could undermine macroeconomic stability and trigger social and political strains in developing countries.”
Lipsky said advanced economies did not have much policy room to manoeuvre to secure faster growth via shifts in domestic macroeconomic policies.
“Other countries (excluding U.S.) either have no room for further fiscal expansion, or they are being pushed by financial market pressures to tighten budget policies immediately. In this context, accommodative monetary policies in advanced economies so far have been welcome and appropriate,” he said.
When asked by reporters on price pressures Lipsky said he was concerned that there were countries where headline inflation had moved above targets.
“It (has) to be watched closely to avoid deterioration in core inflation and inflationary expectations,” he said.