The International Monetary Fund’s latest economic outlook highlights the difficult circumstances Australia faces, federal Treasurer Wayne Swan says.
Mr Swan, commenting on the IMF’s World Economic Outlook – which upgraded its global growth forecasts – says despite inflation concerns, growth in Asian and emerging economies remains robust.
“In particular, the growth outlook for China remains supportive of continued growth in Australia,” Mr Swan said in a statement.
The IMF expects world gross domestic product growth of 4.1 per cent in 2008, up from its 3.7 per cent projection made in April, but slower than the 5.0 per cent recorded in 2007.
It also upgraded 2009 GDP to 3.9 per cent from 3.8 per cent.
The IMF still expects growth to slow during the second half of 2008, especially in advanced economies.
The US economy is expected to “contract moderately” over that time, while growth in the Euro area and Japan is expected to slow also.
Chinese growth was revised up from the April forecast of 9.3 per cent to 10 per cent.
Inflation – driven higher food and fuel prices – is mounting in both advanced and emerging economies.
“The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies,” the report said.
The IMF notes that further financial market turbulence remains “a significant downside risk” – as recent events in the US demonstrate.
Mr Swan said the report highlighted the difficult global challenges Australia faced, in particular the global credit crunch, rising global oil prices and rising global inflation.
“Higher borrowing costs and rising fuel prices are putting pressure on businesses and families both here and abroad,” he said.
“While Australia is not immune from global economic developments, we are better placed than most other countries to withstand the fallout.
“We have highly-regarded regulators and do not face the same problems being experienced in the US sub-prime mortgage market.”