The global financial turmoil of the last couple of weeks appears to be receding, but it will have some impact on global growth, International Monetary Fund Managing Director Rodrigo Rato said Wednesday.
Speaking at a press conference in Sao Paulo, he applauded actions of key central banks in meeting a global credit crunch with measures aimed at increasing global market liquidity. "The IMF forecast for global economic growth could be changed slightly, but not dramatically, because of the consequences on the real economy of the recent global financial market turmoil," he said. He said the IMF's current forecasts put global growth at about 5% in 2007 and 2008. Those figures could decrease slightly, he added. On Thursday, Rato will meet with President Luiz Inacio Lula da Silva in Brasilia. Rato said, "Over the last five years, the global economy has seen solid, steady growth as we had not seen in over 40 years." He added the current background of steady growth and sound fundamentals has left the world economy in a good position to absorb shocks sparked by the U.S. subprime mortgage lending crisis and the resulting global credit crunch. He called the recent financial market turmoil "a correction affecting certain assets." Rato said, "The correction will have some consequences on the real economy. Those consequences will be different for different countries depending on their economic fundamentals." He offered Brazil as an example of a country "well positioned because of sound monetary and other policies" to absorb effects of the correction with little or no impact on its economic performance. More broadly, he said the IMF didn't see any systematic impact on sovereign risk from the recent market turmoil, even among emerging market countries. Rato added, "Over the last five years, what we have seen is that, for the first time, a period of sustained world economic growth is being led by an emerging market country, namely China." |
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