IMF says global imbalances still a risk

WASHINGTON, Aug 7 (Reuters) Risks from global imbalance have faded somewhat in the past year but remain a dominant concern for the world economy, the International Monetary Fund said on Tuesday.

''The imbalances remain historically high, and the possibility of a disorderly and potentially costly adjustment cannot be ruled out,'' the IMF said in a statement, following multilateral discussions with China, the United States, the euro zone, Japan and Saudi Arabia.

''While perceptions of the risks associated with global imbalances have diminished, they remain a key global concern,'' it said. ''Reducing global imbalances is both a multilateral challenge and a shared responsibility.'' The IMF has long warned about the dangers posed by the U.S. current account deficit, which stands around 6 percent of its gross domestic product, and the corresponding surpluses that its main trading partners consequently run with the country''.

As a result, it launched multilateral consultations in June 2006 to tackle the problem without upsetting global growth, and said that progress was being made.

''There have been welcome signs over the past year: imbalances have finally begun to stabilize, accompanied by some rebalancing of global demand,'' the IMF said. ''The multilateral consultation discussions have helped to deepen agreement on a coherent medium-term approach,'' it added.

U.S. growth has slowed somewhat while the 13 nations of the euro zone, which share the common euro currency, have picked up the pace since 2006. They have also seen a steady appreciation in their currency over the dollar to its strongest level in many years.

REUTERS DKS HT2100