IMF – developing nations drive the globe

Published on Asia Times online, by Abid Aslam, Oct. 19, 2007.

2 excerpts: … China, India, Russia and other developing countries will propel the world economy in the year ahead, the IMF says in its latest World Economic Outlook report.

In contrast, advanced economies – hobbled by financial turmoil that originated in poorly regulated niches of their capital markets – will continue to lose steam.

China and India have emerged as the top two contributors to world production and, along with Russia, “accounted for one half of global growth over the past year”, the IMF said. “Other emerging markets and developing countries have also maintained robust expansions,” it added, thanks to buoyant commodity prices, strong domestic demand, stout currency reserves, and reduced debt.

Governments in developing countries have said their importance to the world economy merits a fundamental shift in the balance of power between rich and poor at the IMF and in other organs of global economic governance …

… “At this stage, we still do not know precisely how the losses from the US subprime mortgage market will be distributed nor whether credit conditions will tighten further as expectations of losses affect bank behavior,” Johnson said.

“Like a forest that has not seen a fire in many years, a benign financial environment, including low volatility and unusually narrow risk spreads, had built up a sizeable underbrush of risky loans, relaxed lending standards, and high leverage in certain areas,” he added. “When problems ignited in the US subprime mortgage market, the fire ‘jumped’ in somewhat surprising ways to other areas.”

Chances of a US recession have risen, the IMF said in its report, but the world’s largest economy likely would see a prolonged period of listlessness rather than contraction … (full text).

Link: IMF publications.

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