Global Policy Forum

Washington -The world economy this year could grow at its fastest since 1997, though the United States economy is expanding at an unsustainable rate and Japan's is not reviving fast enough, according to the top International Monetary Fund official said.

"We are expecting global output to rise more than 4 per cent in the year 2000," Stanley Fischer, acting managing director of the IMF, said. "If we look ahead, there will have to be some rebalancing of economic growth."

That rebalancing should focus on the US, which needed to slow the "sizzling pace" of its growth in domestic demand, and on Japan, whose recovery from its longest slump since World War II was slow, Mr Fischer said. World growth last exceeded 4 per cent in 1997, when it reached 4.16 per cent, before slowing to a 2.5 per cent in 1998 and 3 per cent growth last year, according to the IMF.

Days before the annual spring meetings of the IMF and World Bank, Mr Fischer said he would meet Russia's new president, Vladimir Putin, during a visit to Moscow this week.

The US economy grew in the fourth quarter of last year at a 7.3 per cent annual rate, the fastest in almost 16 years, government figures showed last week. "We have no evidence that productivity growth rates will sustain growth rates like that at all," Mr Fischer said.

Still, a US economic slowdown would not "pose any particular problems" because "the US has the tools", such as lowering interest rates, "to deal with any significant slowdown if one were to come". The Federal Reserve has raised interest rates five times since June.

In contrast, weak prospects for growth in Japan remain a "continuing concern" for the IMF, Mr Fischer said. Japan slipped back into recession in the fourth quarter of last year, and so far there is little evidence a self-sustaining economic recovery has begun. The country's economy has expanded in only two of the last nine quarters.

Japan's "economy is probably recovering but it did have a recession in the second half of 1999," Mr Fischer said. "And whereas the US has these reserves of policy, Japan does not. They are at the limits of fiscal policy and they are at the limits of monetary policy. And that is the difference."

Further clouding forecasts for Japan's growth was the change in prime minister, with Yoshiro Mori taking over the reins from Keizo Obuchi, who is in a coma after suffering a stroke on Sunday. "I don't think it's either appropriate or possible at this stage to say what difference it will make with a new prime minister and a new cabinet," he said.

"There has in fact been considerable continuity in Japanese economic policy over the years, and we don't know at this stage what potential changes, if any, there would be." Regarding the IMF's own succession process, Mr Fischer said Horst Koehler, recently appointed to serve as the next IMF managing director, would not begin his work in Washington until next month.

That means Mr Koehler will not preside over the IMF during the April meetings. In Russia, where Mr Fischer will attend an academic conference, he and Mr Putin "will talk about what his views are for an economic reform program", Mr Fischer said.

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