Washington -- The International Monetary
Fund (IMF) projects “robust” global growth for
2005 and 2006 but warns that high and volatile oil prices
continue to pose a significant risk to the world economy.
With stronger global manufacturing and trade,
moderate inflation levels and benign financial market conditions,
the expansion “remains broadly on track,” said
the IMF in its semi-annual World
Economic Outlook issued September 21. Accordingly, it
revised its April growth forecast only slightly, reducing
the previous 2006 figure by 0.1 percent.
Raghuram Rajan, the IMF chief economist,
briefed reporters on the report the same day and said that
the world economy has proved “tremendously resilient”
in the last few years.
"Disease, natural disasters and soaring
oil prices have only caused minor blips in an overall picture
of healthy growth," he said.
On a specific question about Uruguay, Rajan
and Timothy Callen, Chief, World Economic Studies Division
Research Department, stated:
QUESTION: I would like to elicit a comment
of what you say about Uruguay and after the strong recovery
of last year with strong growth, more than 12 percent, and
what are the more important challenges going more than you
say about the debt and the sustainability of the debt and
the dollarization of the economy. The government of Uruguay
now is projecting 5.5 percent growth this year, but you
are still keeping 6 percent as the projection for this year.
MR. RAJAN: I will leave the specific question on Uruguay
for a second. The main concern that emerging markets have,
I think, is to, in a sense, to restore the flow of capital
and their ability to use capital properly without experiencing
the fear of crisis. In a sense, this implies reducing the
risk associated with external capital flows. Being able
to reduce, for example, the extent of dollarization, reducing
the extent to which this necessarily comes through banking
systems but also help allow these countries to borrow through
markets, domestic markets rather than necessarily international
markets. So there are a whole variety of reforms which need
to take place and I think those reforms will help--and this
goes back to the broader point I was trying to make earlier--will
help capital flow again the natural way, from rich countries
to emerging markets and to poor countries, such that investment
can be made in the poorer countries and emerging markets,
which will help in turn the rich countries as the aging
populations age to, in a sense, secure the returns for their
On the specific question?
MR. CALLEN: You said getting beyond the public debt and
banking system fragilities, but we certainly see those as
being the two critical issues for Uruguay. If you look at
public debt, it is even this year projected to be well in
excess of 70 percent of GDP. A lot of it is foreign currency
denominated. As you say, the banking system is still highly
dollarized. These are very important vulnerabilities that
the government needs to continue to address.