Financial crisis not to hit global growth: IMF

Financial markets turbulence probably will curb global economic growth slightly this year, the International Monetary Fund managing director Rodrigo Rato said on Wednesday.
“It would not be surprising if (the turmoil) had a certain impact on growth, more intense in certain countries than in others,” Rato said at a news conference in Sao Paulo, Brazil. Asked whether the IMF will lower its 2007 global growth forecast of 5.2%, he acknowledged “it is possible, but not in a dramatic way,” suggesting a revision to “slightly above 5.0%.” “We are facing a major financial correction on the credit market, in the context of a good economic situation worldwide, that will have some consequences for the economy, probably more for some than others,” he said.
Rato stressed that “the risks have increased, but in the positive context of the world economy” where the fundamentals remain “good” regarding inflation, debt, trade and growth. The IMF last month hiked its 2007 and 2008 growth forecasts to 5.2%, from 4.9%, citing robust growth in emerging markets, led by China, during the H1 of the year. Fears of a credit crunch spreading from problems in the US housing sector have gripped financial markets around the world, triggering a series of heavy sell-offs.
The US Federal Reserve, the European Central Bank and other central banks have pumped hundreds of billions of dollars into financial systems in the past two weeks to ward off a seizure that could threaten the world economy. Rato welcomed the interventions: “The central banks acted in a decisive and appropriate manner to guarantee the liquidity of the markets.” However, he warned that national and multilateral authorities “must remain very vigilant in the coming days”.

Source: ET