THE International Monetary Fund said it is sticking to world economic forecasts for now, but cautioned that much higher global prices for oil and food could dampen growth.
'Despite increasing oil prices, the broad contours of the fund's assessment of the global outlook remain unchanged at this stage,' IMF spokesman David Hawley told reporters on Thursday.
'Significantly higher oil and commodity prices could have a dampening effect on growth if prices remain at elevated levels,' he added.
His comments came as crude oil rose to a record above US$135 (S$184) a barrel on Thursday and Organisation of Petroleum Exporting Countries (Opec) oil ministers said they could do nothing to lower oil prices, calling the market 'crazy'. By the end of the day United States crude settled down US$2.36 to US$130.81.
Turning to global credit markets, Mr Hawley said the ability of banks to raise capital was 'reassuring' although a protracted adjustment in financial sector balance sheets is still likely.
The Washington-based IMF has twice cut its growth forecast for the world economy this year - in January and again in April. In its last outlook in April, it warned the United States was headed for recession this year and put world growth at 3.7 per cent in 2008.
That was down from a forecast in October of growth of 4.8 per cent and a forecast in January of 4.1 per cent, as it tried to account for the world's fast-spreading credit turmoil.
Mr Hawley said the IMF would update its forecast again in July. Meanwhile, a team of IMF economists was currently in Europe assessing the euro-area economy and 'and they will be concluding their work in the next few days', he said.
Authorities in the United States and Europe accused the IMF in April of being overly pessimistic in its April outlook.
First-quarter gross domestic product growth released on Thursday for the 15 countries using the euro topped expectations in an initial estimate by the European Union's statistics office at 0.7 per cent quarter-on-quarter and 2.2 per cent annually.
Mr Jean-Claude Juncker, the chairman of euro zone finance ministers, said he did not believe the worst of the financial market crisis was over and Europe will continue to be affected by the problems, which sprang from sloppy lending practices in the US housing market.
A spokesperson for the European Commission, however, acknowledged that high oil prices could reduce euro-zone economic growth below the 1.7 per cent forecast by the Commission for this year.
On Wednesday, the US Federal Reserve slashed its US economic growth forecast for 2008 to between 0.3 per cent and 1.2 per cent, down from a prior forecast of 1.3 per cent to 2 per cent three months ago. The IMF believes US economic growth will skid from a subpar 2.2. per cent in 2007 to 0.5 per cent this year and 0.6 per cent next year.
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