WASHINGTON – The global economy is firmly on the mend in 2011 but faces rising headwinds, particularly from higher oil prices, the International Monetary Fund said Monday.
The IMF said its latest world economic forecasts were little changed from a January update: 4.4 percent global growth in 2011, ticking down from 5.0 percent in 2010.
A two-speed recovery from the 2009 global recession was expected to continue apace, with emerging-market and developing economies expanding at a 6.5 percent clip, and the advanced economies mustering only 2.4 percent growth.
“The recovery has solidified, but unemployment remains high,” the IMF said in its twice-yearly World Economic Outlook report.
The United States, the world’s largest economy, was projected to grow a modest 2.8 percent, while number-two China topped the growth chart at 9.6 percent.
“The key downside risk to growth relates to the potential for oil prices to surprise further on the upside because of supply disruptions,” the IMF warned.
The Washington-based institution’s growth forecasts assumed an average oil price of $107 a barrel in 2011, after $79 in 2010.
“New downside risks are building on account of commodity prices, notably for oil, and, relatedly, geopolitical uncertainty, as well as overheating and booming asset markets in emerging market economies,” it said.
Surging oil prices have sparked fears of a return to the record levels above $147 seen in 2008, when high food and commodity prices sparked political unrest in some countries.
Olivier Blanchard, the IMF’s chief economist, stressed that the recent oil price rise was not expected to have “major effects” on either growth or inflation.
“My own view is that there is not any major downside risk at this point in the world economy, in the way there was a year or two ago, but there are reasons to worry,” Blanchard said at a news conference.
The report’s authors, however, underlined the difficulty in forecasting a market that has been under the sway of revolts in the Middle East and North Africa region since the beginning of the year.
“The outlook for oil markets remains quite uncertain, as perceptions of geopolitical supply risks can be volatile,” they said.
China and other emerging-market powerhouses such as India and Brazil were driving the strong demand for commodities.
But the IMF also pointed to a “sluggish” production response by the Organization of the Petroleum Exporting Countries when prices moved above the $70-80 range, which the cartel previously had called a “fair” range.
The lack of response by the cartel that produces about 40 percent of the world’s oil supply “has led to some uncertainty in markets about OPEC producers’ implicit price targets.”
Surging food price rises, by contrast, were mainly due to weather-related supply shocks, such as drought and wildfires in Russia and Ukraine that slashed wheat crops.
The IMF economists expressed concern about high unemployment, noting that 205 million people worldwide were looking for jobs, up by about 30 million since 2007.
“Growth is insufficiently strong to make a major dent in high unemployment rates” and “the high and increasing burden of unemployment on young people poses risks to social cohesion,” it warned.
The WEO was released ahead of three days of spring meetings of IMF and World Bank officials that get underway Thursday in Washington.
The 187-nation Fund highlighted that tensions remain entrenched in the financial sector, particularly in the sovereign debt markets of Europe.
“Significant fiscal and financial vulnerabilities still lurk behind recent benign market developments, especially in the euro area,” the IMF said.
Emerging-market economies, meanwhile, needed to guard against overheating and credit booms.
“We’re warning emerging-market countries that they’re getting to the point where things may be too good,” Blanchard told reporters. “And I think there is a long history of countries waiting too long to do something about it.”
In the short term, the most pressing problem for a growing number of emerging and developing economies are “large food price increases, which present other social challenges.”