IMF October 2004

While the International Monetary Fund (IMF) concedes China has cut the risk of an overheating economy, the international lender says an economic soft landing isn’t certain, as stated in the IMF’s annual review of China. “Going forward, [IMF] directors agreed on the need for continued vigilance, and cautioned against a premature relaxation of policy, noting in particular that significant excess liquidity remains in the banking system,” the review said.

Japan’s price deflation should end in 2005 and its real GDP should see growth of 4.5 percent in 2004, said the IMF. The IMF upgraded its GDP forecast from its April prediction of 3.4 percent. Possible threats to GDP growth include a potential sharp rise in global interest rates, economic slowdowns of key trading partners and Japan’s high public debt, added the IMF.

IMF head Rodrigo Rato encouraged countries in Central Africa to tame their dependence on oil if they want financial assistance and debt relief support. “The sub-region’s main challenge is to promote economic diversification, including in many countries reducing the strong dependency on oil resources,” Rato said.

The IMF approved of Nigeria’s homegrown economic strategies in early August, after the African country pulled out of the IMF adjustment program in August 2002. IMF agreed to review the program on a quarterly basis, which may influence other countries to help relieve some of Nigeria’s almost $30 billion debt. The reforms aim to inject more discipline in an economy plagued by poverty, inconsistent growth and oil price dependence.