IMF says no US recession and praises euro zone growth potential

The International Monetary Fund has said that the US economy – the world’s largest – faces slower growth, but not a recession. That word comes in its twice yearly Global Financial Stability Report, published ahead of the IMF’s spring meeting of finance ministers.

The IMF5;s chief economist, Simon Johnson, said: “Notwithstanding the ups and downs of financial markets recently, the global economy is set for another good year in 2007. Our central forecast sees global growth slowing mildly to 4.9% this year, with somewhat slower growth in the United States, continued solid growth in Europe and Japan and continued impressive growth in emerging markets and developing countries, led by China and India.”

For 2007, the IMF believes the euro zone’s economy will grow at 2.3%, the same as Japan and just a fraction ahead of the US at 2.2%. For 2008, it has the US growth at 2.8%, the euro zone unchanged at 2.3% and Japan down to 1.9%.

The euro zone’s economic growth potential got a big thumbs up from chief economist Simon Johnson. He said the euro’s value seemed to be at a reasonable level and inflation in the region is controlled but still needs to be monitored as growth picks up.

He added: “The latest growth numbers are very good, extremely encouraging, and we think the stance of monetary policy and broadly speaking, fiscal policy … is consistent with sustaining this growth.”

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