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The global economy's growth is expected to slow this year
The global economy's growth is expected to slow this year, while still turning in a solid performance, as high energy prices weigh a bit on activity, the International Monetary Fund reported Wednesday. After bounding ahead by 5.1 percent in 2004, the global economy is projected to grow by 4.3 percent this year, the IMF said in its latest World Economic Outlook. The forecast for 2005 is unchanged from an estimate the IMF released in September. "The global economic expansion has remained broadly on track, evolving largely as expected," the IMF said. "Forward-looking indicators appear consistent with solid expansion in 2005, although rising oil prices are an increasing risk." Next year, the IMF is forecasting the world economy to expand by 4.4 percent, slightly faster than the 2005 projection, publishes ABC News. According to FT News, as well as the possibility of a disorderly decline in the dollar, the fund identifed the possibility that inflation pressures lead to a spike in US interest rates, and the high and volatile oil price as key risks to the global outlook. The Bush administration's pledge to halve the US fiscal deficit is not credible, owing to a number of items left out of the budget arithmetic, and ?insufficiently ambitious¦ in any case, the report said. China's economic momentum remains very strong and investment is unsustainably high, the report said, calling on Beijing to use monetary policy to cool the economy. This would require an adjustment in the county's decade-old currency peg to the dollar. China increased its foreign reserves by $200bn last year, as it intervened to keep its currency pegged to the depreciating US dollar. Other developing countries have built up big foreign reserves - partly to insure against financial market risks, and partly to maintain trade competitiveness. ?A number of emerging markets, especially in Emerging Asia, have built up reserves to protect against everything short of the Apocalypse, Mr Rajan said, "The reserve build up is now undermining monetary control as well as the soundness of their financial systems
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