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Economists Optimistic About World Economy at Davos Forum
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The global economy is expected to do well this year, with China and India set to keep their pace of growth, economists said on Wednesday at the World Economic Forum in Davos, Switzerland.


"I think there is built-in stability in the world economic system," Jacob Frenkel, vice chairman of American International Group Inc., told a seminar here.


"Many dire predictions have not taken place, not to say that a crisis may not occur," the economist said.


During the past year, the US dollar had not collapsed, the Japanese yen had not strengthened dramatically, oil prices did not reach US$100 level, and protectionist sentiments had not materialized.


Laura Tyson, dean of the London Business School and a former White House economic adviser, said the global economy was re-balancing, higher oil prices had been absorbed and there were promising signs of Chinese exchange rate flexibility.


"All those things suggest to my mind another Goldilocks year," she said.


But Tyson refrained from being too optimistic. "The big bad wolf is often hiding in the forest and we economists can't see him," she said.


According to the International Monetary Fund, global growth will remain solid in 2007 at close to 5 percent, despite an expected slowdown in the US economy.


China, one of the engines of the world's economic development, kept its fast economic growth last year, with its GDP growth rate as high as around 10 percent.


Min Zhu, vice president of the Bank of China, said the faster-than-expected growth was achieved with prices under control. "China is doing very well," said Zhu.


The vice president believed China will do better in 2007.


One reason for his optimism is that China has made serious policy adjustments since the second half of last year to slow down over-heating investment and exports.


"We see all these things in place now. This year we will also have strong growth, but much more balanced," Zhu concluded.


Montek S. Ahluwalia, Deputy Chairman of the Indian Planning Commission, held positive views about the economic performance of India, another dynamic economy.


"We expect to have a growth rate around 8.3 percent. Though there are some signs of overheating, but not very high," Ahluwalia said.


Despite an overall upbeat mood, there are some potential threats to the world economy.


Nouriel Roubini, chairman of US-based Roubini Global Economics, said the US economic slowdown and the possibility of oil prices rebounding, among others, may dampen world economic growth in 2007.


"The main threat from the US slowdown is whether the US is going to have a soft landing or a hard landing," he said, adding that a recession in the US housing market, coupled with job losses in the manufacturing sector, would eventually undermine consumer spending, which has served as the primary driver of US growth.


The first debate of the annual five-day forum focused on world economic prospects in the short term. More than 2,000 leaders from business, politics, academia, media and civil society will attend the gathering over the week.


(Xinhua News Agency January 25, 2007)


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