World not at risk from a hard landing, says IMF official
Global economic growth should not be at risk even if the mainland economy suffers a hard landing, according to a senior International Monetary Fund official.
Economic counsellor and director of the IMF's research department Raghuram Rajan told economists in Hong Kong he stuck by the fund's earlier forecast that the global economy would grow 4.5 per cent this year, despite worries a significant slowdown in the mainland economy would drag the rest of the world with it. He also restated the IMF's expectation that the Hong Kong economy would grow 5.5 per cent this year, slightly below the government's own 6 per cent forecast.
Dr Rajan, who taught finance at the University of Chicago before joining the IMF last year, said: 'I believe there should be some slowing down of the [mainland] economy.'
A larger issue for the global economy is the impact that the recent spike in oil prices will have for growth. But he said there was little cause for concern so far, as oil prices were still less than half those during in the 1979 oil crisis, when it hit a high equivalent to US$100 per barrel in present-day terms.
Dr Rajan said unlike in the past, the recent rise in oil prices had been driven by rising demand, rather than a cut in supply.
'If a US$6 [per barrel] price hike persists, then global economic growth will fall by 0.4 per cent this year,' he said.
'For the US, the fall will be 0.5 per cent, and for Japan, an even smaller 0.2 per cent.
'Overall, I am still fairly optimistic about economic growth in the world.'
Even if China did slow down, the effects on neighbouring economies should not be overestimated, he said. 'It will be significant, but not overwhelming. The long-run effects will be larger, but by no means disastrous.'
Dr Rajan said despite political rhetoric in the US and elsewhere about China's large trade deficit threatening jobs, the mainland was also a big importer that created work in those countries.
He said the recent development of the mainland economy was not dissimilar to the early rates of growth in other emerging economies, such as the four largest in Southeast Asia.
'The difference is that there is more to come from China,' Dr Rajan said.
He noted the central government's experience in dealing with recent economic crises, such as Sars, had made it more flexible and better prepared to deal with the issue of how to deliver growth at a sustainable pace.
