IMF to revise economic forecasts amid 'global boom'

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WASHINGTON, July 20 (AFP):The International Monetary Fund (IMF) is revising its economic growth forecasts amid a "global boom," the IMF chief economist said yesterday, suggesting a bump up in official estimates.
"We were criticised for being optimistic at the time of our spring forecast," Simon Johnson told reporters, referring to an IMF April forecast of world growth at 4.9 per cent this year and in 2008.
"Let me just say we are quite pleased that we were optimistic," he told reporters, without giving precise figures. The Washington-based IMF will release an update of its closely watched World Economic Outlook Wednesday next.
In a wide-ranging briefing, the top economist at the 185- nation financial institution said rising food prices were an unexpected development feeding inflation, except notably in Japan, and defended China's monetary policy.
"The global picture, broadly speaking, is the US continuing to show weakness, as we expected, but the rest of the world economy has done very well," he said citing Germany, China and India.
"This is a global boom," he said.
The United States, the world's biggest economy, is poised for a lift after limping along at a 0.7 per cent growth pace in the first quarter.
"We think it's going to turn around, though, quite quickly as the dollar already depreciated-that's going to help exports, but also because we think that business investment is going to pick up," he said, adding, "consumption looks very solid."
Rising demand for food, observed since the IMF and World Bank's annual meetings in April, "puts pressure on food prices at the same time that you have an ethanol shock coming in the US," he said. "Nobody expected the size of this impact this year."
Food prices in the US have shot higher as farmers turn more acreage into corn production to make ethanol, a lucrative, alternative energy fuel.
But inflation is a scarce commodity in Japan, the world's second- biggest economy.
"That makes us feel a little puzzled," he added.
On Chinese currency policies, he said: "The direction has been good for a while."
The subject of China's yuan currency has been a sore point between the United States and China, with some US lawmakers saying the Chinese government keeps the yuan undervalued to unfairly gain a trade advantage.
"China is being excessively used by politicians" to defend protectionist views aimed at wooing voters, Johnson said.
"We should recognise that China has done very well for itself," he said. "Bashing them is not a good idea."
In January, IMF managing director Rodrigo Rato called for China to be "more flexible" in setting its exchange rates, renewing a demand frequently made by Western nations. After China loosened its peg to the dollar, Rato stated that Chinese authorities should move "more vigorously" to implement the change.
As for the euro, the IMF is "comfortable" with its current strength near record highs, he said. On Thursday the single European currency shared by 13 European Union countries climbed to 1.3831 dollars, a hair shy of its all-time peak of 1.3833.
Johnson dismissed concerns of an overvalued euro against the dollar. French President Nicolas Sarkozy's call for a brake on euro appreciation has raised a furor in Europe, pushing the German chancellor, Angela Merkel, to a robust defence of the independence of the European Central Bank (ECB).
"There has been some exaggeration or misperception" about the euro, the IMF economist said. "We are comfortable with where the euro is."