Global view improving, risks still to downside: IMF's Zhu

HONG KONG Sun Mar 18, 2012 11:38pm EDT

Min Zhu, Deputy Managing Director, International Monetary Fund (IMF), attends a session at the World Economic Forum (WEF) in Davos, January 26, 2012. REUTERS/Arnd Wiegmann

Min Zhu, Deputy Managing Director, International Monetary Fund (IMF), attends a session at the World Economic Forum (WEF) in Davos, January 26, 2012.

Credit: Reuters/Arnd Wiegmann

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HONG KONG (Reuters) - Global economic growth will slow this year, with the United States looking much improved but risks still to the downside as Europe's financial markets remain fragile, the deputy managing director of the International Monetary Fund said on Monday.

Growth in emerging markets will be strong but the full impact of the slowdown in developed economies has yet to fully filter through to other regions, Zhu Min said at Credit Suisse's Asian Investment Conference in Hong Kong.

Recent U.S. economic data "look much improved", although a key challenge is creating strong growth in a deleveraging environment, Zhu said.

"Number one, the global growth rate is slowing down. Number two, things are getting better. Number three, the risks are still on the downside," he said.

Zhu, a former deputy governor of the Chinese central bank, was speaking a day after IMF Managing Director Christine Lagarde said the global economy had stepped back from the brink and signs of stabilization were emerging.

He said China must rebalance its economy to encourage stronger domestic demand, and added the country's exchange rate must move into a more flexible regime, echoing similar comments by Lagarde on Sunday.

Chinese Vice Premier Li Keqiang, also speaking at the weekend, said the world's second-largest economy cannot delay tough economic reforms and promised flexible policies to keep growth brisk and prices stable.

Zhu was appointed to the newly created deputy managing director post at the IMF in July, in a move aimed at recognizing China's growing clout in the global economy.

The IMF has warned that China's annual economic growth could be cut nearly in half this year if Europe's debt crisis tips the world economy into a recession.

Zhu said economic trends and policy in China were pointing to a soft landing for China's economy, which has been one of the few drivers of global growth in recent years.

"In Europe, the financial markets are still very fragile," Zhu said. "There is no room for any mistake, any slip-up in the market."

The IMF on March 15 approved a 28 billion euro bailout for Greece, warning Athens there was no room for missteps in implementing the economic program.

The latest 28 billion euro loan is part of a bigger IMF-EU bailout package after Greece agreed to a series of painful economic reforms, spending cuts and completing a debt swap that imposed losses of as much as 74 percent on private bondholders.

(Reporting by Farah Master; Editing by Kim Coghill)

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