IMF warns developing nations

| Friday February 15, 2008 00:00

In a speech in New Delhi, IMF managing director Dominique Strauss-Kahn said the links between the West and countries such as India remain strong. As a result the US slowdown will effect developing nations, he argued. To cope with that, he advised emerging nations to manage their finances and regulatory systems carefully.

According to the IMF, in the past a 1 percent decline in US growth had led to a decline in growth in emerging economies by between 0.5 percent and 1 percent, depending on trade and financial links to the US.

But some argue that link has weakened, and countries such as China and India have 'de-coupled' from the West. The reasoning is based on statistics that show developing countries trade more among themselves than ever before.

But in his speech Strauss-Kahn said that often goods traded among developing nations are eventually exported to the US or Europe.He also warned that emerging nations need to make sure their finances are in order and their regulatory systems can cope in case of a slowdown. Last month the IMF lowered its forecast for global economic growth in 2008 to 4.1 percent, after nearly 5 percent last year.

In the US, the IMF predicts annual growth will be below 1% by the final quarter of the year.(BBC)