Oil Prices Soar, World Economic Growth Threatened

World Bank and International Monetary Fund (IMF) predicts that world economic growth will slow this year, mainly due to soaring oil prices. World Bank annual report Global Development Finance 2005 estimates, the world economy in 2005 will drop to 3.1 per cent compared to growth in 2004 which reached 3.8 percent. While the IMF has warned that high oil prices will erode global economic growth by 0.25 to 0.50 percent this year. Both institutions provide growth projections before the joint annual meeting in Washington this month and a week before the IMF publishes its World Economic Outlook the second. In its report, the World Bank said last year developing countries experiencing high growth. Strong economic growth last year was also supported from the expansion of rapid growth that occurred in China, India and Russia. But now developing countries are forced to adjust to because it affected the impact of global imbalances, particularly due to deficits in the United States amounted to U.S. $ 666 billion.

According to the World Bank, developing countries last year's average of 6.6 percent growth, which supported the entry of the flow of funds into the region since the financial crisis late in 1990. Private capital flows (net), including debt and capital (equity), to developing countries last year increased to U.S. $ 301.3 billion. "Recovery influx of funds into an important strengthening of economic fundamentals in many countries in the region," said Francois Bourguignon, Chief Economist of the World Bank. "But what happens to the current global financial recovery can be a threat to economic growth."