The specter of war in Iraq and instability in the world's No. 5 oil producer, Venezuela, as well as world market woes, bode poorly for the global economy, a top IMF official said on Friday.
The IMF had estimated that the world economy would grow by 3.7 per cent in 2003 and has not changed that estimate but the International Monetary Fund's Deputy Managing Director Eduardo Aninat told a conference at Peru's Central Bank that the lender believed that there were 'several risk factors.'
"First, there is the impact of the high price of oil due to the threat of war with Iraq which is further complicated by the situation in Venezuela ... which is tacking on a few more dollars to the price per barrel," he said.
Oil prices have shot up in recent months during a standoff between US President George W. Bush and Iraqi President Saddam Hussein.
Oil hit a new two-year high on Friday with US light crude at $34.00 a barrel after US Secretary of State Colin Powell was quoted as saying Washington would soon prove that Iraq was not cooperating with UN arms inspectors.
World commodity markets have been further shaken by a general strike in Venezuela that has cut oil exports to one-fifth of what they were before the opposition began trying to oust populist President Hugo Chavez. The work stoppage is in its seventh week.
Aninat also said the downward corrections in property and equity markets would be another risk factor for world economic growth in 2003.
Aninat, who told Peruvian radio earlier on Friday that Peru was an island of growth in Latin America, said the economically troubled region had lessons to learn. The IMF estimates the regional economy -- wracked in 2002 by debt woes in Argentina and instability in Brazil -- shrank 0.6 per cent last year.
"The lesson is to shield oneself better in times of stability and growth to be better able to fend off external crises," he said.
