The International Monetary Fund says the world economy is bouncing back faster than anticipated from a slowdown that was aggravated by last September's terrorist attacks in the United States. On the eve of a round of financial meetings in Washington the IMF foresees global growth of four percent next year.
The main revision to the forecast concerns the United States. Four months ago the world's most respected forecaster predicted U.S. growth this year would be only seven tenths of one percent. Now the IMF concedes that the U.S. economy is growing at more than twice that pace and that U.S. growth will reach two point three percent in 2002 and three point four percent in 2003.
Kenneth Rogoff, the Harvard University professor who is the IMF's chief economist, said the U.S. economy is again proving to be the engine of the world economy and that global growth will reach two point eight percent this year and four percent in 2003. "Fundamentally the global economy is very strong. And the main question absent any non-economic event [such as a repeat of September 11] is the durability of the recovery and its strength," Mr. Rogoff said.
Mr. Rogoff said the global slowdown of the past year would have been considerably worse had the United States not aggressively cut interest rates and taxes to boost the spending power of American consumers. "We can thank the fact that this does seem to have been short-lived [the global slowdown] partly on the aggressive policy response we saw in the industrialized countries, notably the aggressive response in the United States with monetary policy and to a lesser extent by the European Central Bank," he said. "The U.S. tax cut turned out to be fortuitous in its timing."
Mr. Rogoff said Japan, now in its third recession in ten years, is the main impediment to sustained global growth. The Japanese central bank, he said, must ease monetary policy to halt deflation. "The main vulnerability to the global economy lies in a sustained downturn in Japan, rather than in policies that would lead Japan to grow again," he said.
The IMF says developing countries in Asia have turned the corner and recovered from their financial crises of five years ago.