KEY POINTS:
IMF chief Rodrigo Rato said overnight that the world economy remains robust with the United States set for a "soft landing" and China extending its breakneck expansion.
But there remain risks of a "disorderly adjustment" in the global economy, with Asian currency rates still too rigid and oil prices remaining volatile, the International Monetary Fund managing director said.
Addressing a New Year press conference on Tuesday local time, Rato said also the IMF was on course to unveil more details of an internal review designed to make the six-decade-old Fund more relevant to its fast-changing membership.
"After four consecutive years of strong growth, we expect that global growth will remain solid in 2007, approaching five per cent for the year," Rato said. The IMF official forecast predicts global growth this year of 4.9 per cent.
"I believe we are facing a soft landing in the US," he said, with the world's largest economy cooling after years of rapid growth.
"Economic recovery in Europe has broadened, and growth in Japan is broadly on track after an earlier soft patch."
Falling energy prices will support the global economy, Rato noted, "although we might see volatility in oil prices down the road."
China is set for another year of growth above 10 per cent, the IMF chief said, while urging Beijing to take more measures to rein in unproductive investment.
Rato reaffirmed that China should open up its financial markets and currency regime more, "to allow market forces to determine prices and allocations of resources in the Chinese economy more freely."
East Asian economies in general are highly competitive and do not need their "heavy reliance" on managed exchange rates, the IMF chief said.
As China and other Asian countries have run up massive trade surpluses on the back of export-led growth, deficits in the United States have been mounting to record levels.
That has created concern that the world economy is dangerously out of kilter, prompting Rato to set up a new surveillance mechanism for major nations to discuss how to redress the imbalances under IMF auspices.
He declined to give details about how the multilateral consultations are progressing, but said he would report back in public at the IMF and World Bank's annual meetings in April.
The meetings will also see Rato elaborate on steps being taken by the IMF to address criticism that it is becoming irrelevant to developing countries.
With no major crises to manage, and many nations fearful of the Fund's free-market policy prescriptions, the IMF has been deprived of regular income from lending repayments and now faces a financial crunch of its own.
Rato welcomed the latest country to exit IMF supervision, after Ecuador's new leftist government said it would pay back its US$33-million debt to the Fund early.
Many developing nations have run up large currency reserves to leave them less reliant on the kind of IMF bailout that became a feature of the 1997 financial crisis in Asia.
Rato said the IMF, after agreeing in September to give more voting power to China, South Korea, Mexico and Turkey, would discuss deeper internal reform at its annual meeting.
But several European and developing nations have voiced disquiet about the proposed changes and are fighting to defend their current share of votes.
Rato insisted: "The credibility and effectiveness of all public institutions is a function of our good governance and perceived legitimacy."
- AFP
