The International Monetary Fund says economic growth is finally spreading from the US to other parts of the industrialised world, but it warns that global imbalances are storing up trouble further ahead.
In its semi-annual World Economic Outlook, the International Monetary Fund predicted growth in global gross domestic product (GDP) of 4.9% this year. In September, the IMF forecast global growth of 4.3%. For 2007, the IMF sees world growth slowing a touch to 4.7%, up from the forecast of 4.4% given last time.
'Despite higher oil prices and a number of natural disasters, economic activity in the second half of last year and early 2006 was strong, and inflationary pressures remain subdued,' the report said.
The IMF forecast that the US economy would expand by 3.4% this year, while the euro zone would grow by 2%, though the latter remained vulnerable to any downturn in external demand, and to high oil prices. Growth in Japan, which is emerging from a slump stretching back more than a decade, was seen in the IMF report as coming in at 2.5% this year before picking up to 2.7% in 2007.
China's GDP was seen expanding by 9.5% this year, helped by booming investment and export export growth. Mammoth trade surpluses being run up by China and oil exporters have helped drive the US current account deficit to an unprecedented 7% of GDP. That kind of global imbalance was identified by the IMF as a serious threat to world growth in the future.
On Ireland, the IMF report predicted GDP growth of 5% this year, rising to 5.2% in 2007. This compares with 4.7% last year. It also predicted that the unemployment rate would remain low at 4.1% this year, improving further to 4% in 2007.
