IMF keeps global growth outlook, upbeat on euro zone

BRUSSELS, Feb 22 (Reuters) The world economy will slow slightly this year from 2006, the International Monetary Fund said today in sticking to its September forecast, but it signalled an upward revision of its euro zone growth projection.

The IMF predicted in September that global growth would slow to 4.9 percent this year from 5.1 percent in 2006. Its first deputy managing director, John Lipsky, stuck to that number despite more upbeat growth views from the European Commission.

''Since September, the risks to the global economy have diminished somewhat. They have certainly not gone away,'' Lipsky told Reuters. ''We are basically unchanged, 4.9 percent.'' The European Commission said on February 16 it expected the global economy to expand by 5.5 percent this year.

''In broad terms, 2007 growth looks to us marginally slower than in 2006 but, in broad terms, very positive. If our forecast is correct, it would mark the fastest five-year period of global growth in three decades,'' Lipsky said in an interview.

For the 13 countries now using the euro, the IMF in September forecast growth of 2.0 percent this year. But that was likely to be raised, the IMF's Europe head Michael Deppler also told Reuters.

The European Commission forecast last week that growth in the euro zone would slow only slightly this year to 2.4 percent from a six-year peak of 2.7 percent in 2006.

''On growth, we have not finalised our figures yet, but I'm very much in the same ballpark as the Commission,'' Deppler said.

ECB SEEN IN NEUTRAL RANGE AFTER MARCH Deppler said euro zone growth was driven by rising employment, partly a result of reforms, which made him confident the recovery was sustainable.

''This is going to be a fairly sustained recovery. We are not talking about something fragile,'' he said.

Markets see the relatively robust growth as increasing the chances of more European Central Bank interest rate rises as the bank seeks to stem inflationary pressure from fast credit growth and possible higher-than-productivity wage increases.

The ECB has signalled it will raise rates by 25 basis points to 3.75 percent in early March, but left its options open for later. Many economists expect rates to go up to 4.0 percent.

Asked how he saw ECB policy after March, Deppler said: ''There, we're getting into a neutral range.'' He would not give the IMF's precise view on euro zone inflation at this time, but said data showed no inflationary impulse from wages in the past.

''If you look at the wage numbers there is nothing in the historical data that warrants any concerns whatsoever,'' he said.

''Historically, however, wages do tend to respond to the cycle, so some pick-up down the road would be normal. The extent to which that is simply in line with upswings in productivity is a bit harder question to have a view on.'' EURO ZONE YEN CONCERNS Data on Thursday showed fourth-quarter growth in the euro zone's biggest exporter, Germany, was driven mainly by exports.

However, Germany and other euro zone countries have complained about the yen's weakness, which gives Japanese exporters an advantage over European rivals on world markets.

The weakness of the yen, trading near all-time lows against the euro , stems largely from low interest rates, which make investment in higher-yielding markets more attractive.

The Japanese central bank raised rates to 0.5 percent from 0.25 percent on Wednesday, but said it had no preset schedule in mind for future hikes and any rate adjustments would be gradual, which sent the yen lower.

''The yen rate at this point is a market-determined rate, the authorities are not intervening,'' Lipsky said.

''It seems clear that the Bank of Japan policy reacted to fundamentals, as the latest data have reaffirmed the growth momentum of Japan's economy,'' he said.

REUTERS SAM HT2300