China, India, Asian economies to lead 3.9 pct global growth this year: IMF

By Hwang Doo-hyong

WASHINGTON, Jan. 26 (Yonhap) -- Strong Asian economies will lead the global economic recovery, bringing substantial growth this year after the first contraction in decades, the International Monetary Fund said Tuesday.

In its World Economic Outlook report, the IMF predicted the global economy will
grow by 3.9 percent this year, up from its previous forecast of 3.1 percent,
rebounding from a 0.8 percent contraction last year.
China and India will take the lead with the projected growth of 10 percent and
7.7 percent each, 1.0 and 1.3 percentage points higher than previous projections.
The newly industrialized Asian economies, including South Korea, will grow 4.8
percent this year, up from the earlier estimate of 3.6 percent, the IMF said.
In December, the IMF raised South Korea's projected growth rate for this year to
4.5 percent, up from a 3.6 percent forecast in October, citing the government's
fiscal and monetary policies, which effectively boosted exports and triggered
domestic demand.
The Bank of Korea recently said South Korea's economy grew 0.2 percent last year
after predictions of negative growth by the IMF and most other institutions.
The Korea Development Institute, which had forecast that South Korea would avoid
negative growth last year, said recently that Korea's economy will rebound 5.5
percent this year.
The IMF, meanwhile, forecast the U.S. economy will grow 2.7 percent, up from the
October projection of 1.5 percent, and Japan 1.7 percent, the same as the
previous estimate, and the European Union 1.0 percent, up 0.7 percentage points
over the projection made three months earlier.
"The global recovery is off to a stronger start than anticipated earlier but is
proceeding at different speeds in the various regions," the IMF said. "In most
advanced economies, the recovery is expected to remain sluggish by past
standards, whereas in many emerging and developing economies, activity is
expected to be relatively vigorous, largely driven by buoyant domestic demand."
The IMF attributed the rapid economic recovery to the economic stimuli provided
by governments, warning against any premature move to end supportive fiscal and
monetary policies.
"Confidence rebounded strongly on both the financial and real fronts, as
extraordinary policy support forestalled another Great Depression," it said. "Due
to the still fragile nature of the recovery, fiscal policies need to remain
supportive of economic activity in the near term. A premature and incoherent exit
from supportive policies may undermine global growth and its rebalancing."
The global lending agency also expressed fears that "impaired financial systems
and housing markets or rising unemployment in key advanced economies may hold
back the recovery in household spending more than expected."
In another downside risk, "Rising concerns about worsening budgetary positions
and fiscal sustainability could unsettle financial markets and stifle the
recovery by raising the cost of borrowing for households and companies," the IMF
said.
The IMF, meanwhile, advised governments with burgeoning budget deficits to
prepare for exit strategies.
"Policies need to foster a rebalancing of global demand, remaining supportive
where recoveries are not yet well sustained," it said. "However, countries facing
growing concerns about fiscal sustainability should make progress in devising and
communicating credible exit strategies."
hdh@yna.co.kr
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