World economic growth may be cresting after the strongest showing in three decades, making it imperative that countries revive global, market-opening talks to tap the benefit of expanded trade, the head of the IMF said on Tuesday.
Addressing the IMF's 184 member countries at a meeting in Singapore, Rodrigo Rato warned that further oil price increases, global economic imbalances and rising trade protectionism were the biggest threats to global growth.
The global growth cycle may be close to its peak, Rato told the audience. In a prepared text of the speech, Rato had said the cycle may be turning.
Still, he said growth was becoming more balanced and a slowdown in the U.S. economy would be tempered by recoveries in Europe and Japan, and strong performances by China and India.
Educated and skilled labour is tight and the scope for further productivity improvements may be diminishing, Rato said, adding, The best hope for continued high growth lies in further increases in international trade.
The IMF chief said the world had lived with high oil prices without any serious effects, but problems may emerge if supply remains tight.
We are not out of the woods yet, he cautioned on the prospects for further rises in oil prices.
Rato also said current account imbalances between the United States and the rest of the world were unsustainable and creating further distortions, both economic and social.
For the sake of its own economy, Rato said the United Sates should make sustainable reductions in its fiscal deficit.
The deficit totaled $304 billion for the first 11 months of fiscal 2006, compared with $354 billion for the year-earlier period, latest figures showed.
Rato called for a renewed commitment to multilateralism to address the global economic imbalances and urged countries to resume stalled Doha trade talks.
On trade, the world will either go forward to greater growth and broader opportunities, or backward, to narrow nationalism, Rato said. We should not fool ourselves that there is a comfortable middle ground.