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IMF sees signs of revival

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NEW DELHI, Sept. 18

THE International Monetary Fund (IMF) has voiced qualified optimism about the growth prospects for the world economy this year, following last year's synchronised and widespread slowdown in major economies of the world.

In its annual report released in Washington, the IMF has said that in the first few months of 2002, there were increasing signs that the slowdown was bottoming out in most regions and that growth was turning up in some — most notably North America and a number of East Asian countries.

This reflected, at least in part, the significant easing of macroeconomic policies in the advanced countries in 2001, especially in the US and in a number of emerging countries in Asia, as well as the completion of ongoing inventory cycles.

The Fund said partly mirroring the weakening of growth in 2001, inflation remained extremely low almost everywhere, with the ongoing deflation in Japan continuing to worsen the already difficult economic conditions in that country.

While in the first quarter of 2002, flows to emerging markets strengthened and risk spreads came down to levels not seen since before the Russian crisis in 1998, the Fund report said that events at the start of financial year 2003 (July 2002 to June 2003) showed emerging markets were "vulnerable" as investors turned more risk-averse and concerns over policy continuity and the debt structure of certain key emerging market borrowers mounted.

According to the IMF, the countries in Asia, with the exception of China and India, generally experienced sharp falls in growth rates in 2001, but began to show signs of turnaround in 2002, while region-wide inflation remained low. Economic activity remained relatively buoyant in China and to a lesser extent in India, largely because both the economies are less dependent on external trade than the other economies in the region and also because of strong domestic demand, although they too have seen some slowing in growth since 2000.

Providing a synoptic picture of its activities, IMF said that its regular and concessional lending increased strongly as the slowdown in the global economy contributed to a worsening of the balance of payments difficulties of several members whose access to global capital markets was curtailed.

Commitments under the IMF's regular loan facilities — stand-by arrangements and the Extended Fund Facility (EFF) — more than doubled to SDR 39.4 billion (almost $50 billion) in fiscal 2002 from SDR 14.3 billion (some $18 billion) in fiscal 2001.

In fiscal 2002, IMF's concessional lending for poverty reduction continued to be channelled through the poverty reduction and growth facility (PRGF) and the joint IMF-World Bank initiatives for heavily indebted poor countries.

In a brief preface to this year's annual report, the Managing Director, IMF, Mr Horst Kohler, said that while it is crucial not to neglect any element of comprehensive support for poverty reduction, expanding opportunities for trade is clearly the best form of help not only because it paves the way for greater self-sufficiency, but because it is a win-win proposition for developed and developing countries alike.

"The elimination of trade-distorting subsidies, not least for agricultural products, and market opening by advanced and developing countries are key to bolstering confidence in the prospects for strong global growth and shared prosperity in the world," Mr Kohler added.

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