IMF warns emerging economies showing signs of 'overheating'
Published 08/03/2011 | 05:00
Fast-growing emerging market economies are beginning to exhibit signs of overheating, a top International Monetary Fund official last night said.
Many emerging markets, including China, have struggled to contain inflation and control the heavy flow of investment money into their economies. Although the IMF has been warning for months of the risks of price pressure, the comments by IMF first deputy managing director John Lipsky suggested the fund was growing increasingly concerned.
"For the emerging economies, growing at 6.5 to 7pc, their margins of excess capacity have been largely used up, and as a result we're starting to see incipient signs of overheating," Mr Lipsky said.
Rising oil prices have compounded the inflation problem, but Mr Lipsky said the IMF had not cut its growth forecast because it thought the oil price spike would prove temporary.
He said until unrest spread to oil-producing Libya, much of the rise in oil prices in late 2010 and early 2011 reflected an improved economic outlook.
However, the latest worries about supply disruptions created a "fear factor" that drove oil above $100 a barrel, and, if sustained, that would pose a bigger threat to growth.
Rising food prices also posed a threat, particularly to lower- income countries.
High food prices were one of many reasons behind the recent upheaval in Egypt and Tunisia.
"We have to be concerned even in places where there is no political upheaval," Mr Lipsky said.
"The social strains and real difficulties for poor residents in many economies is something that has to be attended to." (Reuters)