The International Monetary Fund says world economic growth prospects are being put under pressure by the sharp plunge in world stock prices and by the threat of war in the Middle East.
IMF chief economist Kenneth Rogoff says there is considerable uncertainty at the moment, mainly because of the threat of what he called a new conflict in the middle east. In its semi-annual forecast, the IMF says the world economy will grow by 2.8 percent this year, rising to 3.7 percent next year. Mr. Rogoff says if oil prices continue to rise that would act as a brake on growth.
The IMF forecast is an important working document for dozens of finance ministers and central bankers who will be participate in the organization's annual meeting on Sunday.
The economic outlook reveals wide disparities by region. The advanced economies are depressed with Japan actually contracting and the European Union expected to register only one percent growth this year. The United States is also depressed but growth is anticipated to be 2.2 percent this year.
China, meanwhile, continues to experience an economic boom. The IMF has revised its China growth forecast upward to 7.5 percent this year. Latin America is the major depressed region, mainly because of its dependence on exports to the United States, which are down from what was previously expected. Latin America as a whole is expected to register negative growth of 0.6 of one percent this year. Argentina, which is experiencing what Mr. Rogoff calls a tragic and unprecedented crisis, is experiencing a 16 percent decline in economic activity.
Africa is expected to register three percent growth this year and somewhat higher growth in 2003.
Mr. Rogoff says western Europe is growing at a rate well below its potential. He said European Union governments need to make their labor markets less rigid, meaning that they should reduce the high level of government regulation, and streamline their generous social welfare systems.