IMF report to warn of oil price threat to global economy
Heather Long
Saturday August 20, 2005
The Guardian
The International Monetary Fund is to warn that record oil prices pose a
significant risk to the global economy and could thwart growth next year,
according to an apparent leak of its forthcoming World Economic Outlook.
Oil prices spiralled to over $67 a barrel earlier this week and many
analysts have cautioned the economy could be headed for a recession if
such high prices continue.
Yesterday the price of oil jumped $1 to above $65 a barrel after news that
rockets hit two US warships docked in Jordan and another in southern
Israel.
The IMF, normally known for cautiously worded reports, is expected to warn
that, "all in all, the dangers have become greater" from oil prices, when
it puts out its six-monthly global outlook in mid-September.
The Washington-based think-tank predicts average oil prices of $51 a
barrel this year. This might appear to be a low figure after recent crude
prices topping $60 a barrel, but last year's average oil price was under
$40. The IMF outlook for 2006 is even higher, at $53 a barrel.
In the IMF's last report in April, it predicted that the global economy
had "become less balanced" with unstable oil prices and worrying US
current account and budget deficits. September's report is expected to
conclude that the situation has become even more grave.
The critical leak of next month's World Economic Outlook surfaced
yesterday in Handelsblatt, the weekday German financial newspaper.
The IMF predicts global growth will reach 4.3% this year and 4.4% in 2006,
Handelsblatt said. These estimates are much lower than the 6% average
growth in the global economy in late 2003 and early 2004.
The eurozone continues to lag behind other regions of the world and is
expected to grow by only 1.3% in 2005. The IMF's bleaker forecasts came
from worries over frequent oil production bottlenecks and a lack of
refineries to meet world demand, according to the German paper.
Separately, British consumer confidence plummeted to its lowest level this
year as shoppers became increasingly aware of the state of their personal
finances and fearful of prospects for the economy.
The measure of the economic "feel-good factor" compiled by the market data
group Experian fell heavily. Its index measuring the balance of those
expecting to spend more on major purchases in the coming year had dropped
to five in July, from 19 in January, it said.
"In spite of steady earnings growth and a stable labour market,
perceptions of the country's economic situation and people's own household
finances have worsened over the past few months," said Addween Sacha, a
senior consultant at Experian.
The perceptions of the job market are especially weak according to the
survey, even though Britain's unemployment rate is 4.7%, much lower than
continental Europe or even the United States.
"Consumer confidence fell in almost every region of the UK, most notably
East Anglia and the north, where confidence was previously high," said Ms
Sacha.
http://www.guardian.co.uk/oil/story/0%2C11319%2C1552987%2C00.html
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