The recent global credit squeeze caused by the meltdown of risky US mortgage loans may test the ability of the world's economy to keep expanding, the IMF said yesterday.
The IMF also said government policymakers would be confronted with new problems from the continuing process of globalization and warned against overconfidence that economic stability would continue indefinitely.
In the analytical chapters of its World Economic Outlook released in advance of the Oct. 17 publication of the forecast, the IMF said the durability of the global economic expansion is expected to persist.
PHOTO: AFP
"Nevertheless, with financial markets around the world now being affected by the fallout from the US subprime mortgage difficulties, a broader economic slowdown cannot be ruled out," the IMF said.
Rodrigo de Rato, outgoing head of the IMF, said Monday in an interview with the London newspaper Financial Times that the credit crisis was "not a storm in a teacup."
Although the credit crisis may not continue to rage with the same intensity as before, de Rato said, it will take "a few months, probably into next year," before liquidity, availability of credit and risk spreads would return to more normal levels.
The IMF report is issued in advance of meetings of the Group of Seven major industrialized nations and the annual meetings of the IMF and its sister organization, the World Bank, on Oct. 20 and Oct. 22.
The IMF warned against overstating prospects for future economic stability.
"The process of globalization continues to present policymakers with new challenges as reflected in the difficulties in managing volatile capital flows, increasing exposure of investors to developments in overseas financial markets and the uncertainties associated with large current account imbalances," it said.
The IMF said interest rates had returned to more neutral levels in most major advanced economies.
But the 185-nation lending organization said: "The correction of asset prices in some countries and the current rise in risk premiums and tightening credit market conditions may also test the strength of the current expansion."
In a chapter titled "Globalization and Inequality," the IMF said the debate on the effects of globalization is polarized between two points of view. One school argues that globalization leads to a rising tide that lifts all boats.
The opposing school argues that although globalization may improve overall incomes, the benefits are not shared equally among the citizens of a country.
The IMF said available evidence "does suggest that income inequality has risen across most countries and regions over the past two decades, although the data are subject to substantial limitations."
"Nevertheless, at the same time, average real incomes of the poorest segments have increased across all regions and groups," the fund said.
Among the largest advanced economies, the IMF said, inequality appears to have declined only in France.
Among major emerging market countries, trends are more diverse, with sharply rising inequality in China, little change in India and falling inequality in Brazil, Mexico and Russia.
Tropical Storm Gaemi strengthened into a typhoon at 2pm yesterday, and could make landfall in Yilan County tomorrow, the Central Weather Administration (CWA) said yesterday. The agency was scheduled to issue a sea warning at 11:30pm yesterday, and could issue a land warning later today. Gaemi was moving north-northwest at 4kph, carrying maximum sustained winds near its center of up to 118.8kph and gusts of 154.8kph. The circumference is forecast to reach eastern Taiwan tomorrow morning, with the center making landfall in Yilan County later that night before departing from the north coast, CWA weather forecaster Kuan Shin-ping (官欣平) said yesterday. Uncertainty remains and
SEA WARNING LIKELY: The storm, named Gaemi, could become a moderate typhoon on Wednesday or Thursday, with the Taipei City Government preparing for flooding A tropical depression east of the Philippines developed into a tropical storm named Gaemi at 2pm yesterday, and was moving toward eastern Taiwan, the Central Weather Administration (CWA) said. Gaemi could begin to affect Taiwan proper on Tuesday, lasting until Friday, and could develop into a moderate typhoon on Wednesday or Thursday, it said. A sea warning for Gaemi could be issued as early as Tuesday morning, it added. Gaemi, the third tropical storm in the Pacific Ocean this typhoon season, is projected to begin moving northwest today, and be closest to Taiwan on Wednesday or Thursday, the agency said. Today, there would likely
DISRUPTIONS: The high-speed rail is to operate as normal, while several airlines either canceled flights or announced early departures or late arrivals Schools and offices in 15 cities and counties are to be closed today due to Typhoon Gaemi, local governments announced last night. The 15 are: Taipei, New Taipei City, Taoyuan, Tainan, Keelung, Hsinchu and Kaohsiung, as well as Yilan, Hualien, Hsinchu, Miaoli, Chiayi, Pingtung, Penghu and Lienchiang counties. People should brace for torrential rainfall brought by the storm, with its center forecast to make landfall on the east coast between tonight and tomorrow morning, the Central Weather Administration (CWA) said. The agency issued a sea warning for the typhoon at 11:30pm on Monday, followed by a land warning at 11:30am yesterday. As of
CASUALTY: A 70-year-old woman was killed by a falling tree in Kaohsiung as the premier warned all government agencies to remain on high alert for the next 24 hours Schools and offices nationwide are to be closed for a second day today as Typhoon Gaemi crosses over the nation, bringing torrential rain and whipping winds. Gaemi was forecast to make landfall late last night. From Tuesday night, its outer band brought substantial rainfall and strong winds to the nation. As of 6:15pm last night, the typhoon’s center was 20km southeast of Hualien County, Central Weather Administration (CWA) data showed. It was moving at 19kph and had a radius of 250km. As of 3pm yesterday, one woman had died, while 58 people were injured, the Central Emergency Operation Center said. The 70-year-old