IMF to trim 2007 GDP forecast

The IMF will trim its global growth forecast for 2007 but the outlook remains healthy for a year of "profound change" where Europe and Asia do more for growth as the US economy weakens, a top IMF official said on Tuesday.
The IMF in September forecast 4.9 percent growth next year after 5.1 percent this year, both well above long-term average, and IMF First Deputy Managing Director John Lipsky said changes to the forecast would be marginal.
Speaking to a small group of reporters over lunch in Paris, Lipsky said the big event of 2007 was an expected shift towards Europe and the emerging market economies of Asia as drivers of global growth while the US economy lost some steam.
"The coming year is going to be a year of important change in the world economy, inevitably next year and beyond," Lipsky, second-in-command to IMF managing director Rodrigo Rato, said.
"After a period of unexpectedly good economic performance, the underlying sources of global growth are shifting, and will be shifting," he said. "That will require caution on part of policy-makers to make sure this favourable environment is maintained in a context of profound structural change."
US consumption was headed for a period of slower growth than in recent years, said Lipsky, while domestic consumption growth in Asia and Europe should quicken.
"In the United States ... the relative strength of the economy will depend more on improvement in net exports and business investment and less on growth in household consumption," he said.
"In the rest of the world, the euro area and emerging Asia, growth is going to depend relatively more on growth in domestic demand and less on growth in exports. In relative terms there's going to be a shift." Lipsky said it was up to policy-makers to preserve the level of stability the world had enjoyed in recent years.
"The world has become more stable, not less stable. It is my firm belief that that in part reflects the beneficial impact of globalisation and it also reflects in large part the concentration of central banks across the world on maintaining stability-oriented policies, focused on keeping inflation low."
Lipsky was in Paris for largely technical meetings at the IMF's European offices on currency exchange rate modelling, said officials, insisting the discussions were not about exchange rate policy.