World economic growth will stand higher at 5.1 percent in 2006 and 4.9 percent in 2007, both 0.25 percentage points higher than the previous forecast in April, the International Monetary Fund (IMF) said in Singapore Thursday.

"We are now in the fourth year of strong global growth, growth that has been maintained in the face of headwinds such as soaring commodities prices," said Raghuram Rajan, IMF economic counselor and Research Department director, at a press conference.

In addition to this, Rajan continued to say, the good news is that growth is becoming more balanced even if the U.S. economy is beginning to slow, the euro area has gained momentum, Japan's expansion continues, and emerging markets and developing countries are delivering very impressive growth rates.

The IMF released its latest "World Economic Outlook" Thursday ahead of the IMF and World Bank's annual meetings, which is expected to open next week in Singapore.

While elaborating the report, Rajan warned of a host of potential threats to the generally upbeat outlook.

The key short-term risks are, first, a sharper than projected slowdown in the United States, coupled with some uncertainty about the extent to which the rest of the world's growth is autonomous of the United States'; second, a further increase in global inflationary pressures stemming from tight labor and commodities markets that could induce central banks to tighten more than currently envisaged, which might alter the currently benign conditions in financial markets; and third, an abrupt unwinding of global imbalances.

For now, however, the outlook remains bright, with China booming, Japan winning its long fight with deflation and the euro zone set to sustain its recovery, helping to offset a softer U.S. performance, the IMF said.

According to the report, U.S. economic growth is expected to slow from 3.4 percent this year to 2.9 percent next year as the housing market cools.

A euro zone recovery is gaining traction with growth of 2.4 percent expected this year, easing to 2.0 percent in 2007 partly due to German tax hikes.

Emerging Asia continues to enjoy growth in excess of 8 percent a year, powered by the sizzling Chinese and Indian economies.

China is projected to grow 10 percent this year while a moderate deceleration is seen in India from 8.3 percent in 2006 to 7.3 percent in 2007, with a chance of even faster growth in both countries, the report said.

To maintain current growth, the IMF called on policymakers to respond flexibly to events and act with foresight to head off potential strains, recognizing the importance of spillovers across countries and the benefits of taking a joint approach to managing global risks and promoting a robust world economy.

"The strong world economy we enjoy today is because policies to enhance competition, economic sustainability, and flexibility were implemented in the past. For the good times to continue today and to continue into the future, today's leaders should refocus from spending the dividend to reinvest for the future," said Rajan.

Source: Xinhua