Global growth still in forecast
WASHINGTON — Even though oil prices are high and U.S. interest rates are expected to rise, the International Monetary Fund is not expected to reduce its forecast for strong global growth, Rodrigo Rato, the fund’s head, said Wednesday.
Rato said inflated energy prices in some parts of the world are being offset by better economic performances in others.
“Although it is true the price of oil is $5 higher than we would have predicted a few months ago, higher demand in the world economy will more than compensate for that effect,” Rato said at his first news conference since taking over as head of the 183-nation lending organization.
“The prediction the fund made of 4.6 percent (global growth this year) we don’t see a risk it will be revised downward,” he said.
He said higher oil prices are having less of an economic impact than they did in the past because economies have become more efficient in their use of energy.
Rato, the former finance minister of Spain, said inflation in the United States was not a risk, even though the Federal Reserve is expected to increase interest rates later this month.
“I think that observation is shared by most institutions, including the Federal Reserve,” he said. “Monetary policy will follow a path already mentioned.”
Rato said he has a heavy travel schedule leading up to the annual meetings in October of the IMF and its sister institution, the World Bank. He plans to visit Japan, China, Singapore and Vietnam next week and then go to Africa and Latin America. He also will stop in Germany for talks with his predecessor, President-elect Horst Koehler, who resigned in March to accept the mainly ceremonial post.
Turning to Iraq, Rato said the U.N. Security Council vote Tuesday to support the new government clears the way for the IMF to begin an assistance program to the Arab nation
“The vote … was a very important step in the future of the new Iraqi government and the fund’s cooperation with them,” he said.
The IMF has said it could provide about $850 million in post-conflict assistance once Iraq has an internationally recognized government. In total, the IMF has pledged between $2.5 billion and $4.25 billion over a three-year period.
Speaking about Argentina, one of the IMF’s biggest borrowers, he repeated the fund’s call for resolution of the government’s $100 billion in debt.
“We share with the Argentine authorities the view that one of the steps they have to complete to leave the crisis behind is to get an agreement with all creditors,” Rato said. This is necessary “to allow the Argentine society to have full access to international credit markets,” he said.
Argentina’s economy collapsed in December 2001. At that time the government defaulted on some $82 billion in bonds and other obligations.