Chinas and Indias strong growth portends an inevitable change of the guard in Asia, Funds economic counsellor Kenneth Rogoff told the press here on Thursday while releasing the Funds bi-annual report on World Economic Outlook: Prospects and policy issues.
We project Chinas growth at 7.5 per cent for 2003 and 2004, and the risks are quite possibly tilted to the upside there. India is also growing strongly, Dr Rogoff said.
The press conference was also addressed by IMF deputy director Graham Hacche and its director, research department, David Robinson. The report was released as part of the IMF-World Bank annual meetings here.
The report says in those countries where poverty remains a major concern, GDP growth has remained relatively resilient despite the weakness of the global economy. However, substantial differences across countries remain. In China and to a lesser extent in India per capita GDP growth is quite robust, the report says.
The IMF economists expressed optimism about seeing a return to normal growth in the global economy. Immediate geo-political uncertainties have receded after shocks from the equity price bubble are dissipating and the massive policy stimulus put in place after the downturn is starting to bear fruit.
The fact that recovery has not produced jobs poses some risk to consumption and even greater risks are possibly posed by the significant possibility of a housing price bust in some countries, especially as historically low interest rates rise as the global economy picks up.
Another cloud on the horizon is the high and growing level of public indebtedness throughout the world. In fact, the outlook gives a clarion call to the potential default problems looming in emerging markets that do not take advantage of relatively benign conditions prevailing at present.
The outlook expects the American economy to move into a phase of faster growth in the second half of this year but the overvalued dollar and the ballooning fiscal deficit could knock the recovery.