The International Monetary Fund (IMF) is likely to raise its 2006 forecast for global growth and the outlook for the world economy is favourable, German officials said on Wednesday.
The Fund is due to publish its global growth report on April 19 ahead of the IMF and World Bank April 22-23 spring meetings in Washington. Finance ministers and central bankers from the Group of Seven (G7) rich nations meet in Washington on April 21.
"One can be very happy with the situation," German Deputy Finance Minister Thomas Mirow told reporters in Berlin. "For the fourth year, we'll have global growth of more than four percent. That is unusual.
"The forecasts are tending towards another upwards revision rather than a downwards one," Mirow said, lending weight to recent media reports.
A source in the German delegation to the IMF said growth in the global economy this year should be similar to that seen last year and that the outlook was favourable.
IMF managing director Rodrigo Rato told Reuters in an interview last month that world economic growth this year will beat the IMF's most recent forecast, made last September, of 4.3 percent, thanks to a recovery in Europe and Japan.
"World economic developments remain favourable," the source said. "In 2006 global growth should reach a similar level as in 2005, so just under 5 percent."
"The pick-up has broadened and is going in the direction of balance," the source added. The driving factors remained the US and Asian countries, especially China.
Finance ministers from Asia and Europe, meeting in Vienna on Sunday, predicted a 4.5 percent expansion of global economic output this year despite persistently high oil prices.
Growth in 2006 in the eurozone was seen at about 2 percent, in Japan 2.5-3.0 percent and in the United States 3.5 percent, the source said.
In recent weeks, German newspapers have reported the IMF planned to raise its 2006 global growth forecast to as much as 4.8 percent.
Mirow cited high oil prices, global imbalances and protectionism as risks to the global economy that would be addressed at the Washington meetings later this month. The source said higher interest rates were also a concern.
Mirow referred to geopolitical risks in oil producing regions like Nigeria and the Middle East.
He noted that despite robust economic growth in the United States, the budget and current account deficits in the world's largest economy had continued to grow in 2005. "This theme, of current account balances and imbalances, will definitely be discussed," the source said, noting that global imbalances had shifted recently, with oil exporting countries now running the biggest current account surpluses.
Mirow said there were few differences among leading economies on the need for China to increase flexibility in the valuation of the yuan currency. But he said there were differences in tone on how to address the issue. "I think the European view overall is that if one applies too much pressure, then it doesn't yield the desired results," he said.
The United States in particular has been pressing for more yuan flexibility.
The source added with regard to US-China relations: "It remains to be seen whether tensions ease despite promises by China to strengthen domestic demand ... because the indications up until now aren't pointing in that direction."
Mirow said Germany was prepared to back a move to raise IMF quotas for China, South Korea, Mexico and Turkey, which would give them a bigger say within the Fund.
The source said it was too early to talk about a shared IMF seat for the eurozone but there was room for a more formal role for the ECB president in the top-level International Monetary and Financial committee. "One must allow for the level of integration that we have currently reached by giving the ECB president the right to speak," he said.
Currently ECB President Jean-Claude Trichet has observer status at the IMFC and can only speak when invited to.
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