WASHINGTON – The world economy is likely to grow by a 12-year high of 4.7 percent in 2000 but significant risks and uncertainties remain, including the shaky recovery in Japan, large trade deficits in the United States and surging oil prices, the International Monetary Fund (IMF) said in a report issued Tuesday.
The IMF’s semiannual World Economic Outlook report revised upward its estimate for world real gross domestic product (GDP) growth for calendar 2000 to 4.7 percent from 4.2 percent forecast in April, and to 4.2 percent in 2001 from the previously estimated 3.9 percent. In 1999, global GDP expanded by 3.4 percent, the IMF said.
The estimated growth for this year is the largest since an identical increase in 1988.
“This improvement has been led by the continued strength of the U.S. economy, a robust expansion in Europe, and a nascent — albeit still fragile — recovery in Japan,” the report said.
The IMF also attributed the brighter outlook to improved economic fundamentals in emerging-market economies, rebounds from last year’s slowdown in Latin America and the Middle East, and stronger performance in Africa.
But the IMF warned against excessive optimism, citing recent surges in oil prices as a factor overshadowing the overall world growth prospect.
“While the outlook remains highly uncertain, with many oil producers close to capacity and stock relatively low, there may still be upside risks to prices in coming months,” the report said.
As another concern, the IMF referred to uneven patterns of GDP and demand growth among three key currency areas — the U.S., Japan and Europe.
The IMF said U.S. real GDP is projected to grow 5.2 percent in 2000 and 3.2 percent in 2001 following a 4.2 percent gain in 1999 while GDP in euro member countries is forecast to expand 3.5 percent and 3.4 percent after a 2.4 percent rise in 1999.
Japan’s GDP was put at a far smaller estimated growth range — 1.4 percent for 2000 and 1.8 percent for 2001, although these estimations show a strong recovery from a meager 0.2 percent gain seen in 1999.
The imbalances of growth among the three major currency areas helped cause two other discrepancies among them — a record-setting current-account deficit in the U.S. and big current-account surpluses in Japan, the IMF said.
The IMF said the estimated 4.2 percent world GDP growth for 2001 is based on the assumption that these imbalances are resolved in an orderly fashion.
There is “the need to continue policies designed to re-balance growth and demand across the major currency areas in an orderly manner,” the report said.
In Japan, for example, consumer confidence remains weak and deflationary pressures persist, requiring its monetary policy to be “highly accommodative until clear signals that the recovery has become self-supporting emerge,” the IMF said in an explicit criticism of the Bank of Japan’s August decision to end the zero-interest-rate policy.
Real GDP in Japan grew by an annualized 4 percent in the first half of fiscal 2000 but a significant proportion of this growth is “transitory in nature,” making the recovery beyond midyear fragile and subject to downside risks, the IMF said.
As a major concern in Japan, the IMF cited slack private consumption, which it says reflects declining household income and high savings rates associated with ongoing corporate restructuring and high unemployment.
The report urged Japan to introduce an early supplementary budget for fiscal 2000 to mitigate the withdrawal of fiscal stimulus coming from a sharp fall in public investment starting in the second half of the year.
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