The global economic recovery faces “considerable downside risks,” said Naoyuki Shinohara, deputy managing director of the Washington-based International Monetary Fund.
The improvement will be led by emerging markets where overheating and inflationary pressures in some countries are being exacerbated by large capital flows and rising commodity prices, Shinohara said today in Gaborone, Botswana’s capital, according to the text of his speech.
Fighting in the Middle East and North Africa are boosting oil prices, which may harm the recovery if they persist at current levels, he said. A broadening of financial industry strains due to the sovereign and banking risks in the euro area are adding to constraints on growth.
Oil is at more than $100 a barrel on supply concerns due to an uprising against Libyan leader Muammar Qaddafi and unrest in other North African and Middle East nations, while a March 11 temblor and tsunami has hurt growth in Japan. Some countries in Europe implemented austerity measures to contain national and banking industry debt.
“In a nutshell, the good news is that we expect the global recovery to proceed, led by emerging markets, but the not so good news is that it will remain a multi-speed recovery with considerable downside risks,” Shinohara said.
Botswana needs to reduce the size of its public service and look for other engines of growth rather than relying on mining, he said.