Global economic growth is expected to cool slightly this year after the strongest pace of expansion in four years last year, the World Bank said Wednesday, while the IMF warned high oil prices were braking growth.
The World Bank's annual Global Development Finance 2005 report showed overall economic growth of 3.8 percent last year, while projecting a slowdown to 3.1 percent this year.
Separately, the International Monetary Fund warned that high oil prices were increasingly a "downside risk" to the global economy, and forecast they would trim at least 0.25 to 0.50 percentage points off growth this year.
The signals by the two sister institutions came ahead of their joint annual meetings in Washington later this month, and a week before the IMF publishes its twice-yearly World Economic Outlook on the state of the global economy.
The World Bank noted that developing countries outgrew high-income countries last year, and gains were widespread.
"But global growth momentum has peaked, and developing country gains are vulnerable to risks associated with adjustments to ballooning global imbalances -- especially the [US'] US$666 billion current account deficit," the report said.
The strong global performance last year was underpinned by solid US growth (4.4 percent) and rapid expansion in China, India and Russia.
Developing nations grew at an average 6.6 percent pace, supported by a surge in financial flows not seen since the financial crises of the late 1990s.
"This recovery of financial flows is a welcome sign of renewed market interest in developing countries and a tribute to the substantial strengthening in economic fundamentals achieved in many countries," said Francois Bourguignon, the World Bank's chief economist.
"But we should also keep in mind that current global financial imbalances pose risks -- of disorderly exchange rate movements, or of interest rate increases -- that could threaten these gains. Developing countries need to prepare themselves for adjustments, some of which could be sudden."
IMF managing director Rodrigo Rato, in a newspaper interview published Wednesday, said that surging oil prices would shave between 0.25 and 0.5 percentage points off global economic growth this year.
"The high price of oil will cut growth of the global economy by at least 0.25-0.50 percentage points again this year," Rato told the German business daily Handelsblatt.
Oil prices surged to new records this week, topping a high of US$58.28 dollars in New York on Monday, even if they have since eased from their highs in profit-taking.
"We've revised upwards sharply our calculations for the annual average price of oil this year," Rato said.
So far, the global economy had been able to absorb such imbalances "in an orderly fashion ... But if oil prices, inflation and currency movements trigger abrupt changes, the situation could deteriorate dramatically," Rato said.
Meanwhile, a fall in the dollar -- even in tandem with an appreciation of the yuan -- would not by itself correct the US current account deficit and other global imbalances, Bourguignon said.
Action by the US to cut its budget deficit and faster growth in Europe will also be required, they said.
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