(by Dr. Goldfinger)

In its global economy outlook the International Monetary Fund predicted worldwide output to lift 5% despite of worries about high oil prices.

New figure is just 0.4% higher from the prior 4.6% of growth forecast still shows more optimistic outlook. IMF economists say they had to revise their estimate because of the first quarter powerful expansion.

IMF also predicts oil prices to be around $37 per barrel this year and next. "To me it just looks a highly optimistic forecast," said Desmond Lachman, a scholar at the American Enterprise Institute and a former IMF staff member. Specialists note that some regions are not so sensitive towards oil prices rise. Moreover, central banks have established credibility in fighting inflation, making oil prices less likely to cause a panic in financial markets that could drive interest rates sharply higher.

Still, analysts note that geopolitical factors sometimes can dwindle down oil forecasts so the IMF should be careful with it.

The IMF predicts 3.6% annual growth for the U.S. in 2004, and 3.5% in 2005. Europe is predicted to lift 2.2% in 2004 and 2005. As for Japan, it is projected to boost 4.4% this year and 2.3% next year.

“We are in a much better situation than we were in the 1970s," said Raghuram G. Rajan, the IMF chief economist. "Our models indicate that the impact of higher oil prices, in terms of the direct effect . . . is likely to be moderate,” he added.