The prospect of a surge in global economic growth this year has given world leaders a final chance to tackle the massive imbalances that threaten to trigger a recession and provoke a return to 1930- style protectionism, the International Monetary Fund said yesterday.
The financial watchdog raised its forecast for global growth this year to 4.9 per cent, the second highest in three decades, from its September outlook of 4.3 per cent.
Two-thirds of the extra growth came from China, India and Russia, with Chinese growth revised up 1.3 percentage points - more than the entire growth of the Italian economy - to 9.5 per cent. But the IMF warned four years of growth above 4 per cent had allowed politicians to avoid dealing with a whole range of risks to the global economic outlook.
"It would be fair to say to the world 'you've never had it so good'," Raghuram Rajan, its chief economist, said. "But serious policy reform has gone into remission. This period of strong growth is the perfect time to address the medium-term problems of adjusting to a more competitive integrated world.
"Unfortunately far too little is being done in far too many places... and from an economic viewpoint there is unlikely to be a favourable environment in which to tackle it."
The IMF said the huge imbalance between record financial deficits in the US, and surpluses in China and other Asian superpowers, was not sustainable. But he said the US's continued ability to fund its shortfall had allowed the optimists to "gain ground" over the pessimists. …