The International Monetary Fund has raised its world economic growth forecast for this year and next due to accelerating expansion in China, India and Russia. In an update of its forecasts made in April, the IMF also said the mortgage default problems in the United States do pose risks to financial markets, but for now the damage appears “likely to remain largely contained.”
For this year, the IMF is predicting 2.6% growth for the euro zone and Japan but just 2% in the United States. But for next year it sees the US regaining momentum with the economy expanding by 2.8%. In 2008, the euro zone would grow by around 2.5% and Japan by 2%.
China’s growth projection this year was revised to 11.2% from 10% in April and world growth over this year and next is upped from 4.9% to 5.2% with China, India and Russia accounting for more than half of that. But the IMF is warning inflation pressures are building world wide from high energy and commodities prices and labour shortages making it now more likely that central banks would respond by putting up interest rates.