|
IMF, World Bank to Meet Amidst U.S., Iraq “Headache”
 |
| President
of the World Bank James Wolfensohn |
WASHINGTON,
September 23 (IslamOnline & News Agencies) - The world’s
economic chiefs must confront gathering war clouds menacing a fragile
global recovery at annual International Monetary Fund (IMF)-World Bank
meetings in Washington D.C. next weekend, experts said.
“The
global economic situation is one of recovery but less buoyant than one
had hoped,” former International Monetary Fund chief economist
Michael Mussa told Agence France-Presse (AFP).
As
finance ministers of the 184 members of the IMF and World Bank will
gather September 28-29, a little more than a year after the terror
attacks, the threat of conflict in Iraq will overshadow talks, he
said.
“There
is concern about Iraq and world oil prices as one source of risk,”
Mussa said.
Further,
there were fears that the sell off in global equity markets, as well
as an erosion of earlier gains in consumer and business sentiment,
could restrain the recovery, he said.
The
IMF is widely expected to lower its world growth forecasts when it
releases the twice-yearly World Economic Outlook, which in April had
tipped global growth of 2.8 percent this year and 4.0 percent in 2003.
“The
world economy is expanding at a slower pace than earlier thought and
risks lie ahead,” IMF first managing director Anne Krueger told a
news conference last week.
“It
is obviously expanding, possibly somewhat less rapidly than it was
earlier thought,” Krueger said. “There are obviously the downward
fragilities.”
Mussa
said the world gross domestic product - or economic output - expanded
by barely more than one percent in 2001 when compared with the last
quarter of 2000.
“I
think for the world economy as a whole, again fourth quarter to fourth
quarter, it will be around three percent this year,” he added,
citing steady expansion in Asia, a modest U.S. recovery and Japan's
emergence from contraction into growth.
Downside
risks to the economy would likely dominate the IMF-World Bank
meetings, Moody's Investors Service chief economist John Lonski said.
“The
big worry would be the possibility of another unfavorable external
shock from Iraq,” he said.
“It
seems as though the world economy itself might be in the process of
mending from 2001’s slump, or sharp downturn,” Lonski said.
“But
I think the reality is that the world economy is not yet strong enough
to withstand an adverse shock from outside the realm of normal
economic activity.”
IMF
policymakers faced a great deal of uncertainty, largely because of the
threat of military action hanging over Iraq and the possible impact on
energy prices and on sentiment among businesses and consumers, he
said.
“As
long as the threat of a conflict with Iraq is very real, then you
cannot dismiss the possibility of a double dip recession [in which the
U.S. economy slips back into recession after a brief recovery],”
Lonski said.
“A
conflict with Iraq is the most likely trigger mechanism for a double
dip recession,” he added. “That would be damaging to even East
Asia, where the Japanese economy has gotten a breather from stepped-up
exports to the United States.”
Lael
Brainard, former deputy economist under then president Bill Clinton
and now a senior fellow at the Brookings Institution in Washington,
agreed that the U.S. economy and Iraq provided the biggest headache.
“I
presume that everyone thinks the biggest single risk factor is the
U.S. going into a double dip recession, which of course would not be
on the official agenda,” Brainard said.
“That
going to hinge on what happens in foreign policy - the big Iraq
question.”
Brainard
cited uncertainties over the stock market and economic outlook, future
oil prices, military spending on any maneuvers in Iraq and economic
ructions in Latin America, particularly Brazil.
Thousands
of protestors demanding debt-relief and aid for the world’s poorest
countries are expected to converge on Washington during the meetings
next week.
Last
year, the IMF/World Bank protestors joined the tens of thousands of
Americans commemorating the anniversary of the Palestinian Intifada
and protesting the aggressions aimed by Israel and the U.S. against
the Palestinian people.
|
