A top International Monetary Fund (IMF) official cautioned that emerging market economies, that powered the global recovery, may be growing too fast for their own good as inflation pressures build up.
Several fast-growing countries, including China and Brazil, have tried their level best to check inflation and control heavy inflows of investment money. Although IMF has been issuing warnings for months on the risks of price pressure, the comments by IMF first Deputy Managing Director, Mr John Lipsky, are first clear indication that the Fund is growing increasingly concerned.
Mr. Lipsky said that for the emerging economies growing at 6.5 per cent to 7 per cent, the margins of excess capacity had been largely used up, and as a result incipient signs of overheating were being witnessed.
Following the world economic slump of 2008 and 2009, the revival took divergent paths, with emerging markets marching strongly ahead while advanced economies merely trudged along. Investors began flocking to emerging markets, bringing in the much-needed capital and also a risk of inflation because of interest rates remaining unusually low worldwide.
Mr. Lipsky opined that rising oil prices had compounded the inflation problem, but pointed out that IMF had not cut its growth forecast as it considered the oil price spike to be temporary.
Source : Exim News Service - WASHINGTON, March 10