IMF on world economy: Will the recovery 'spring' eternal?

(From Business Line)

The world economy is on the recovery path and the IMF has forecast for the next two years a growth rate that is the best in over a decade. S. Sethuraman looks at how the turnaround came about, and the risks that lie ahead.

THE International Monetary Fund (IMF) has delivered the most upbeat assessment for the world economy, projecting a 4.5 per cent average growth for 2004-05, the best two-year period in over a decade. Finance Ministers of industrial and developing nations who gathered in Washington in April celebrated the "springtime of recovery" after a somewhat prolonged downturn, with calls for more "pro-growth" reforms to sustain the resurgence despite serious risks to overcome.

Standard rhetoric apart, there was no commitment on the part of the major players - the US, the EU and Japan - to any co-ordinated strategy for bringing about an orderly resolution of global imbalances or achieve a smooth transition to higher interest rates, which would eventually be required as growth strengthens globally.

But there remains uncertainty about the timing and speed of future moves in the realm of monetary policies. Dutifully, the ministers called for early progress to the stalled Doha Round and reduction of trade-distorting subsidies in agriculture, but stressed that successful …