CHAPTER I ECONOMIC PROSPECTS AND POLICY ISSUES
- International Monetary Fund. Research Dept.
- Published Date:
- April 2004
With the global recovery strengthening and broadening, the IMF staff’s baseline forecast has been revised upward significantly, with global GDP growth in 2004 and 2005 now projected at about 4½ percent (Figure 1.1, Table 1.1). With global trade rising sharply, financial markets buoyant, and the U.S. economy rebounding, the balance of risks has significantly improved. In the short run it is possible that global growth may be higher than projected, although geopolitical risks’including terrorist attacks’and oil prices have become increasing concerns. But significant challenges and risks remain, including achieving an orderly resolution of global imbalances, notably the large U.S. current account deficit and surpluses elsewhere; addressing difficult medium-term fiscal situations in many industrial and emerging market economies; and managing the eventual transition to higher interest rates. While policymakers need to continue to ensure that the recovery is sustained, the focus increasingly needs to shift toward these issues, including through a credible and cooperative approach to addressing global imbalances, and to rebuilding room for policy maneuver to deal with unexpected shocks. In both advanced and developing countries it will be essential to take advantage of the recovery to press ahead with the structural reforms needed to improve growth potential, flexibility, and resilience, and to resist protectionist pressures.