IMF Predicts Easing of World Financial Crisis, Rise in Growth

The International Monetary Fund on Tuesday predicted an easing of the world’s economic crisis and said that global growth will rise to 3.4% next year from a projected 2.3% for 1999.

But the fund admitted that its forecasts for 2000 could be too optimistic. The U.S. economy might slow more than expected, Japan could stay mired in recession or Europe may be unable to grow fast enough to take up economic slack elsewhere.

“For 1999, I believe the risks are evenly balanced,” IMF Chief Economist Michael Mussa told a news conference launching the fund’s semiannual World Economic Outlook. “For the year 2000, the forecast is for growth to recover to 3.4%, but there the balance of risks is on the downside.”

Mussa said that the world economy looks healthier than it did just three or four months ago, when financial markets were worried about the situation in Brazil and elsewhere in Latin America. “I do believe that the worst of this crisis is behind us,” he said.

Mussa’s latest comments were considerably more upbeat than previous assessments, when the fund warned that the world could tumble into recession.

“The risk of recession is comparatively low,” he said. “The risk is maybe not so much that growth next year will be below growth this year, but that growth next year will not recover by the full percentage point that is our baseline forecast.”

The report revises the IMF forecast for U.S. 1999 growth up to 3.3%, from a December 1998 forecast of 1.8%. But it lowered growth projections for Japan, Europe and Brazil.

“We do not yet see clear evidence that we have got a turning point in Japan,” Mussa said. “We need a little bit more information that the bottom has occurred.”

The comments dimmed hopes that Japan, whose economy shrank 2.8% last year, could soon emerge from its deep recession.

The IMF also said the worst is over for Asia’s onetime tiger economies, and it forecast growth for Thailand and South Korea this year.