The global economy will see 'tepid' growth of 3.2% even assuming a swift conclusion to the Iraq war, the International Monetary Fund warned today.
The IMF, in its semi-annual World Economic Outlook, said the war was just one of several factors holding back the global economy, which the IMF said grew 3% in 2002. But it said the likelihood of a strong postwar snapback are slim.
The IMF baseline forecast 'assumes a tepid global recovery, with normal growth only resuming sometime during the first half of 2004,' said IMF chief economist Kenneth Rogoff. Rogoff said that a stronger recovery is possible 'if war jitters have indeed been single-handedly forestalling the recovery.'
But other than the Iraqi war, he said the economy faces a number of problems, including the unwinding of the stock market bubble, the risk of a housing bubble, financial imbalances including a large US financial deficit and the new outbreak of a virulent strain of pneumonia.
Today's report says the global economy is expected to strengthen to see a more solid 4.1% growth rate in 2004.
The IMF report cited a wide range of economic forecasts for the major economies and the developing world. It said the US is expected to lead the recovery in the industrialised world, even though its growth will be a subpar 2.2% rate in 2003 before an acceleration to 3.6% in 2004.
The euro zone would achieve 1.1% growth in 2003, the IMF predicted, down from the 2.3% it forecast last September. It added that further European Central Bank interest rate cuts should also be considered.
Japan, expected to grow just 0.8% this year and 1% next year, must urgently halt a four-year slide in prices, unknown in the industrial world for the past 50 years, the IMF warned.
