IMF Chief:U.S.slowdown the Key Topic

The chief of the International Monetary Fund said Friday that a key topic for the global economy is how it will adapt to slowing growth in the U.S., although so far the world has proved resilient in the face of higher interest rates and surging oil prices.

The IMF projects that global growth will rise 5.1 percent this year before moderating a bit to a still strong 4.9 percent in 2007 _ both a quarter-point higher than it forecasted in April.

But it warned in its World Economic Outlook, released Thursday, that one of the biggest risks to global growth was a likely slump the U.S. economy caused by a cooling of the housing market. It sees U.S. growth slowing to 2.9 percent next year from a projected 3.4 percent this year.

"One important question ... is how the world will adapt to a less buoyant U.S. economy," Managing Director Rodrigo de Rato said during a press conference. "Of course that doesn't mean that the U.S. slowdown will be dramatic but certainly we are in a less dynamic environment, although still a very positive one in terms of potential in the U.S."

De Rato said that the world economy has shown its toughness amid higher energy prices and monetary tightening by the world's major central banks. "The world economy has been able to respond positively," he said.

But he warned that "policymakers need to be ready to adapt to a more difficult environment" in the coming year.

The IMF chief also said he foresees no quick fix to rectifying global imbalances of trade and investment. Over the summer, the Washington-based institution invited the U.S., China, Japan, Saudi Arabia and the 12-nation euro zone to take part in multilateral consultations on addressing the issue.

"Global imbalances are a complex problem that took many years to build up," de Rato said. "It would be unrealistic to expect the problem to be resolved through a quick fix."

De Rato declined to say if he thought proposed reforms in the voting structure of the IMF would be approved, though suggested the results so far has been positive.

The fund's executive board has approved a two-step plan to give more weight to emerging economies in recognition of their growing share of the global economy.

As a first step, the IMF has proposed boosting the voting shares of four countries _ China, South Korea, Mexico and Turkey _ it considers most underrepresented by increasing their quotas, or financial commitments, to the Washington-based fund.

Within two years, the IMF plans to rework the voting shares of the all 184 member countries.

"What is clear is that there was a very clear majority on the board to endorse the resolution," de Rato said.

The proposal must be approved by 85 percent of board of governors.

Each country's vote, however, is determined by its quota. The U.S. vote, for example, counts for about 17 percent of the total, and Japan counts for 6.1 percent. The Pacific Island nation of Palau has voting share of 0.013 percent.

While nearly all member countries support reforming the IMF's voting structure, several have expressed reservations about the proposal being considered.

India wants the IMF to adopt a single, new formula for calculating quotas, not doing it in stages. Mercosur, the South American trade bloc that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela, has demanded greater voting power in the institution.

Even China, one of the immediate beneficiaries of the changes, has said the reforms doesn't give other developing regions such as Africa, enough voice.

The gathering is expected to draw 16,000 delegates and other participants _ but few protesters due to Singapore's ban on outdoor demonstrations, citing concerns that street protests could be exploited by terrorists for possible attacks.

In Indonesia, activists plan to gather on Batam island, a short ferry ride from Singapore, to hold seminars, but protests have been banned.

The IMF, established in 1945, fund works to foster economic and financial stability, avert crises and can aid countries in trouble.