World economy 'set to accelerate'

The world economy is expected to accelerate in 2006, despite setbacks caused by recent natural disasters and fears over the surging price of oil. In its latest analysis of global growth, the International Monetary Fund forecast that the world economy would expand by 4.9% this year.

The prediction marks an upward revision of a previous IMF estimate for global growth in the region of 4.3%.

However, the IMF warned that higher oil prices remained a risk to growth.
The Washington-based lender's comments came as US oil prices breached record highs above $71 a barrel on growing fears over Iran's nuclear stand-off with the international community.

Tsunami setback

The world economy grew by 4.8% last year, topping previous predictions, the IMF said in its closely-watched World Economic Outlook.
"Notwithstanding higher oil prices and natural disasters, global growth has continued to exceed expectations," the IMF said.

"Looking forward, the baseline forecast is for continued strong growth, although risks remain slanted to the downside."

Growth last year came despite the Asian tsunami, which swept across the Indian Ocean in late 2004 claiming the lives of more than 200,000 people, and Hurricane Katrina, which devastated the US Gulf Coast and caused a spike in world oil prices.

China, India and Russia accounted for most of the IMF's upgrade for growth in the current year.

'Moderate impact'

China's booming economy alone is expected to grow by 9.5% this year - up from a previous estimate of 8.2% - and by 9% in 2007.
However, the IMF predicted that the US - the world's largest economy - would see growth of 3.4% this year and 3.3% in 2007, slightly below 2004's figure of 3.5%.

Britain's economy is expected to grow by 2.5% this year, up from a previous estimate of 2.2%, and by 2.7% in 2007.

The eurozone economy, which is dominated by Germany and France, is set to grow by 2% this year, but fall back to 1.9% in 2007.

The IMF said the impact on the world economy of higher oil prices had been "more moderate than generally expected", because inflation among many leading economies was widely seen to be under control.

If the IMF's current predictions for 2006 turn out to be correct, it will be the best performance by the world economy since 2004, when global growth hit a 30-year high of 5.3%.