Emerging economies must address inflation: IMF official

10:28, March 22, 2011      

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Rising inflation pressures in the emerging economies calls for fiscal and monetary policy adjustments, while fiscal sustainability is not an immediate concern for them, John Lipsky, first deputy managing director of the International Monetary Fund (IMF), said Monday.

Lipsky, who is in Beijing for the China Development Forum which opened Sunday, told Xinhua that accelerating inflation has shown signs of overheating among the emerging economies, and the need is clear for near-term fiscal and monetary policy adjustment.

China is "suffering inflation pressure, with its increasing headline inflation index and rapid expansion of some assets prices, especially real estate prices," he said.

However, fiscal sustainability is not a major near-term concern for emerging economies in light of higher fiscal deficits and public debt in many economically advanced countries, Lipsky said.

"In advanced economies, public debt is piling up to unprecedented heights, creating worries about fiscal sustainability. While the situation is quite different in many key emerging economies," said Lipsky.

IMF analysis indicates that fiscal deficits of advanced economies will average about 7 percent of gross domestic product (GDP) in 2011, and the average public debt ratio will exceed 100 percent of GDP for the first time since the end of World War II.

While fiscal deficits in emerging economies fell last year to an average 3 percent of GDP and the figure will decline again this year. Debt ratios are also much lower than those of advanced economies.

China has just announced to lower its budget deficit in 2011 to 900 billion yuan (137 billion U.S. dollars) earlier this month, with the deficit ratio down from 2.5 percent of GDP in 2010 to 2 percent of GDP this year.

"The adjustment is appropriate," said Lipsky.

Lipsky said he also noticed the adjustment in China's 12th Five-Year Plan.

"The blueprint is challenging, but promising," said Lipsky, adding that the underlining a message in the blueprint is to preserve strong growth through structural change in the economy.

"The plan promises to shift sources of growth, boost domestic demands and create a social safety net, which will in turn reduce the high level of savings and is consistent with the theme of global rebalance," he added.

Lipsky revealed in the interview that the IMF anticipates global growth this year to be about 4.5 percent, following the 5 percent gain registered last year.

"The IMF is watching the situation in Japan," he said, adding that although the massive earthquake and tsunami have a negative influence on the Japanese economy, the IMF is still confident that the effect on economic growth will be contained if the nuclear leak is controlled in time.

Source: Xinhua
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