The International Monetary Fund Wednesday says the world economy is expected to grow faster this year than it originally forecast. VOA's Barry Wood reports the upgrade is mostly the result of faster than anticipated growth in China, India and Russia.
Charles Collyns, IMF deputy chief economist, says the world economy is continuing to expand at a brisk pace.
"Emerging market economies have led the way, with China growing at a very impressive 11.5 percent in the first half of 2007, India and Russia also [are] growing very strongly," he said.
The global forecast is being upgraded despite a downward revision in predicted U.S. growth to two percent this year. U.S. growth is expected to recover to 2.8 percent next year. Collyns says China's economy is moving from strength to strength and is now the largest single contributor to the increase in world growth.
"Against this background, we have raised our forecast for global growth in both 2007 and 2008," he said. "Global growth is now projected at 5.2 percent in both years, compared to 4.9 percent growth projected at the time of the April 2007 world economic outlook."
But some IMF officials voiced a note of caution. Jaime Caruana, chief IMF capital markets specialist, says the world economy still faces the danger of financial instability. The risks, he says, are apparent in the United States, where some mortgage lenders have faltered as borrowers could not meet their payments.
"The materialization of these risks are set to continue as rising mortgage rates will translate into higher rates on adjustable rate mortgages, many of which will reset [upwards] this year and next year," said Caruana.
A minority of American homeowners are behind in their payments and outright defaults have risen dramatically. Caruana says mortgage problems are likely to worsen in the United States before they get better. Nonetheless, he sees little prospect of an adverse global impact from U.S. housing weakness. Worldwide, credit has been readily available and some experts believe low interest rates have created speculative bubbles in many markets