*EPF412 04/18/2002
IMF Optimistic About Global Economic Growth in 2002, 2003
(Projects U.S. economy spearheading rebound) (520)

By Andrzej Zwaniecki
Washington File Staff Writer

Washington -- The International Monetary Fund (IMF) projects the world economy to rebound in 2002 at a rate slightly higher than previously expected after a sluggish performance last year.

"There are now increasing signs that the global slowdown, which began in the middle of 2000, has bottomed out," the IMF said in the World Economic Outlook, a semi-annual publication, released April 18.

The Fund credited the quick and aggressive response of policymakers for keeping the downturn more moderate than most previous ones. A general tendency toward milder recessions in industrialized countries and the growing role of the relatively closed economies of China and India also mitigated the downturn, the IMF said.

The Fund forecast the global economy to expand in 2002 by 2.8 percent, up from the 2.4 percent rate estimate in December 2001.

While global gross domestic product (GDP) growth is projected to be only slightly higher than the 2.5 percent expansion of 2001, it is anticipated to accelerate significantly during 2002, the Fund said. This is expected to lead to a 4.0 percent growth in 2003, the IMF said.

Considering that the U.S. economy accounts for over 20 percent of global output, the Fund said a stronger than expected recovery in the United States may once again make it the locomotive of world economic expansion. The IMF projects 2.3 percent U.S. growth in 2002 and 3.4 percent in 2003.

"The United States entered a very strong and healthy recovery," IMF chief economist Kenneth Rogoff said during an April 18 press briefing on the latest projections.

In contrast, the IMF said, Japan's ability to recover from the third recession in the past decade remains very weak, with positive growth expected to reappear only in 2003.

The IMF noted that the emerging markets that had demonstrated resilience in face of the global recession such as China, India, and Russia are expected to hold up well. And in Latin America, the recovery is likely to be strongest in Mexico and Central America, the Fund added.

While the IMF said the current projections are more reliable than those made in December, it cited a number of significant risks to a strong and sustained recovery, including the large current account deficit in the United States and surpluses elsewhere, overly optimistic financial market expectations for corporate profitability, deep recession in Japan and rising tensions in the Middle East that may lead to a surge in oil prices. These vulnerabilities, the Fund said, will "pose important challenges for policymakers in the period ahead."

Following are key projections from the report:

Percentage increase
2001 2002 2003

World Output 2.5 2.8 4.0
Advanced economies 1.2 1.7 3.0
United States 1.2 2.3 3.4
Japan -0.4 -1.0 0.8
European Union 1.7 1.5 2.9
Developing countries 4.0 4.3 5.5
China 7.3 7.0 7.4
India 4.3 5.5 5.8
Countries in transition 5.0 3.9 4.4
Russia 5.0 4.4 4.9

Consumer prices (inflation)
Advanced economies 2.2 1.3 1.8
Developing countries 5.7 5.8 5.1
Countries in transition 15.9 10.8 8.7

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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