The global economy should turn in an energetic performance this year, even though its biggest player, the United States, is expected to experience its weakest growth in five years, according to a new International Monetary Fund (IMF) forecast.

"By and large things look very good," said Simon Johnson, the fund's top economist.

In its latest World Economic Outlook released Wednesday, the IMF is projecting the world economy will grow by 4.9 per cent this year and next.

While that would be a moderation from last year's 5.4 per cent advance, it would still represent a remarkably healthy showing, analysts say.

Projections for the Caribbean - inclusive of Caricom members and Domincan Republic - were 2.9 points down from last year's outturn. Growth in 2007 is estimated at 5.4 per cent, compared to 8.3 per cent for 2006.

Jamaica is projected to grow three-tenths of a point to 3.0 per cent in 2007 and marginally to 3.1 per cent in 2008. Trinidad will slow five points to 7.0 per cent, the IMF report said.

Overall, the LatinAmerican region is also expected to dip six-tenths of a point to 4.9 per cent this year, with Brazil and Chile seen as exceptions.

The Fund reasons that regional economies will see a decline in oil revenues, on projections that world oil prices will fall. But there is also downside risk for those with close trade ties to the U.S.

Sharper than expected

"A sharper than expected slowing in the United States would hit Latin America harder than other regions," said the IMF.

"A more pronounced decline in commodity prices or tighter financing conditions in international markets would also adversely affect growth prospects."

The U. S. economy is expected to grow by 2.2 per cent this year, which would be the slowest since 2002, when it was recovering from a recession. Last year, the U.S. economy managed to expand by 3.3 per cent, a two-year high even as it coped with a painful housing slump.

In its fresh forecast, the IMF downgraded its projection for U.S. growth this year to the current 2.2 per cent gain, from the 2.9 per cent forecast made last September.

"The U.S. housing market downturn in the United States has, if anything, been deeper than projected," the IMF said.

"A turnaround in residential construction is still several quarters away."

The U.S. economy should pick up some speed next year, however, and expand by 2.8 per cent as the drag from the housing slump eases, the IMF said. That would mark an improved - but still somewhat sluggish - performance, analysts say.

So far, the U.S. housing slump has had little impact on economic activity in the rest of the world.

"Overall, the baseline view remains that difficulties in the housing sector will not have major spillovers," the IMF said.

Still, risks remain.

Problems

If the problems in housing were to spread throughout the U.S. economy, forcing consumers and businesses to cut back severely on spending and investment, that could spell trouble, the IMF warned.

And, if problems with risky mortgages were to infect the broader mortgage market and lead

to a widespread tightening of credit, the implications would be even more worrisome.

"Such a development could imply a deeper and more prolonged slowdown or even a recession in the United States, with potential spillovers to other countries," the IMF report stated.

Oil prices

Another risk to the global economy is that oil prices will spike again, which could rekindle fears about inflation, the IMF said. Last summer, oil prices surged past US$78 a barrel in the US.

However, a bout of turbulence in financial markets in recent months has not undermined the outlook for global growth, Johnson said.

"I don't believe that the financial tail is about to wag the economic dog," he said.

World economic growth is expected to remain solid even in the face of much slower activity in the United States as other countries pick up the slack.

Another global powerhouse, China, is expected to log blistering growth of 10 per cent this year and 9.5 per cent next year, according to the IMF's forecast.

The country's economy expanded by 10.7 per cent last year.

India, which grew by 9.2 per cent last year, will moderate to 8.4 per cent this year. Next year, it will expand by 7.8 per cent.

Britain should see economic growth of 2.9 per cent this year, but slow a tad to 2.7 per cent in 2008.

'Spillovers'

The economies of Canada and Mexico - two neighbouring countries more likely to experience 'spillovers' from the U.S. economic slowdown - should grow by 2.4 per cent and 3.4 per cent respectively this year. That's a bit weaker than the IMF's forecast in the fall.

The IMF's outlook will figure into discussions this weekend during the spring meetings of the 185-nation fund and the World Bank. Finance officials from the world's richest countries gather Friday.

Selected IMF growth projections

Jamaica- 3.0%
Trinidad- 7.0%
Caribbean - 5.4%
Latin America - 4.9%
Japan- 2.3%
Russia- 6.4%
United States - 2.2%
China- 10.0%
India- 8.4%
World- 4.9%

AP and Gleaner reports

Taken from the Financial Gleaner, Friday April 13, 2007.