World Economy

IMF Nations Warn of Forex Rates, Geopolitical Risks

IMF Nations Warn of Forex Rates, Geopolitical RisksIMF Nations Warn of Forex Rates, Geopolitical Risks

The International Monetary Fund's member nations late Saturday warned of risks to the global economy from exchange rate shifts and geopolitical tensions as they took note of "moderate" global growth and "uneven prospects."

While economies in developed countries have strengthened, some emerging nations are being hit by weaker commodity prices and exports, the IMF's steering committee noted in a communiqué, Reuters reported.

With the United States poised to hike interest rates, the panel – speaking for the Fund's 188 member nations – said moves toward "policy normalization" needed to be effectively communicated to reduce adverse impacts on other economies.

It also said the "possibility of lower growth potential" was becoming an important global challenge.

"I came out of this meeting with a sense of optimism," the chairman, Mexican Finance Minister Agustin Carstens, said.

"The fact that a lot of the discussion basically rotated around how to increase growth ... and not only discussing risks – I think that was a very good sign."

Growing Concerns

The spring meetings of the IMF and World Bank, which conclude on Sunday, have taken place amid growing concerns cash-strapped Greece will fail to reach agreement with its European Union and IMF creditors on reforms that would unlock bailout cash and stave off default.

At the same time, risks of a stronger dollar and low commodity prices have hit emerging markets as China's blistering economic growth has slowed.

Low inflation remains a concern for many developed economies despite signs the European Central Bank's quantitative easing program has boosted Europe's ailing economy, and the communique called for easy monetary policies to be maintained where needed.

In the United States, the central bank's moves toward a rate hike have sent the dollar soaring, and officials from nations around the globe warned of the risk of financial and economic disruptions as the path of major central banks diverge.

China's Growth Slower But Safer

China's economy slowed to a safer and more sustainable range, marking the transition to its economic "new normal", said a senior IMF official.

In a recent interview with Xinhua, Steven Barnett, a division chief in the Asia and Pacific Department of the IMF, said China's economic growth which moderated to 7 percent in the first quarter, the slowest pace since 2009, is in line with what IMF expects China's growth range which stands between 6.5-7 percent.

"We think this marks the transition what in China is being called 'new normal'. We will call you to get on a slower but safer and more sustainable growth path," he said.

In IMF's biannual World Economic Outlook (WEO) report released on Tuesday, the Washington-based lender forecast China's economy would ease to 6.8 percent in 2015 from 7.4 percent in 2014. The growth is expected to cool to 6.3 percent in 2016.

Price Target

The IMF said it’s become harder to estimate when the Bank of Japan will achieve its inflation target, suggesting the global fund is backtracking from its prediction of around 2017 or 2018, Bloomberg reported.

“It’s just too uncertain for us to say x or y time,” Kalpana Kochhar, the IMF’s mission chief for Japan, said in an interview Friday in Washington. There are many uncertainties, including oil prices, wage growth and Japanese companies’ potential use of cash holdings, making it hard to make a prediction, she said.

While BOJ Governor Haruhiko Kuroda reiterated that the bank will attain the goal around the year ending in March 2016, the IMF has forecast that through 2016 inflation will remain halfway toward the central bank’s target. A 50 percent decline in the price of oil has halted gains in the BOJ’s preferred gauge of prices, making it more difficult for Kuroda to reach his target within the planned two years.