IMF sees growth risks

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The global economy faces testing times because of the danger of inflation, unbalanced trade flows and deadlocked world trade talks, International Monetary Fund chief Rodrigo Rato said on Friday, reports Reuters.

As Rato set the scene for annual meetings of the fund here, World Bank Paul Wolfowitz hit out at the host government for what he called its "authoritarian" decision to bar 27 civil rights activists from entering the city state.

Wolfowitz said Singapore had violated the understanding it had come to with the two international lending agencies to allow anyone accredited into the meeting.

"Enormous damage has been done and a lot of that damage is done to Singapore and self-inflicted. This could have been an opportunity for them to showcase to the world their development process," he said at a meeting with civil society organisations.

Rato, the IMF's managing director, vouched for the activists, who have been accredited by the fund and the bank for the meetings, and urged Singapore to reconsider the ban.

"If they don't, I think they would be making a mistake," he said.But the thrust of Rato's comments concerned the state of the world economy as he listed a number of risks that could derail what has been the strongest and longest burst of global growth in 30 years.

The IMF on Thursday raised its projection for 2007 world growth to 4.9% from 4.7%, but Rato told reporters that spare capacity was shrinking, fanning concerns about inflation that high oil prices were making worse.

"And of course, the risk of a disorderly adjustment of global economic imbalances has not gone away, and could well be exacerbated by the other risks."Policy makers, many of them here this weekend, need to be ready to adapt to a more challenging environment," Rato said.

The elite of those policy makers, finance ministers and central bank governors from the Group of Seven industrial countries, meet on Saturday amid market speculation that they will renew pressure on Asian nations, particularly China, to let their currencies rise to help reduce global imbalances.