The International Monetary Fund is predicting global growth of about 4.5 per cent in the following two years but the headline figure masks a two-speed global picture, with emerging nations far outpacing so-called "advanced" economies.

The biggest uncertainty appears to be the speed with which Japan can recover from last month's earthquake and tsunami.

Growth prospects for emerging and developing nations is forecast at 6.5 per cent on average for 2011 and 2012. During those years, China is expected to grow by around 9.5 per cent.

Olivier Blanchard, Economic Counsellor and Director of the Research Department at the IMF, said: "I think we are warning emerging market countries that they are getting to the point where things are getting too good. And I think there is a long history of countries waiting too long to do something about it."

The Fund wants high-growth emerging nations to consider raising interest rates to ease inflationary pressures, which would help global imbalances as well.

Mr Blanchard said: "Emerging market countries must rely less on external demand and more on domestic demand. Appreciation of emerging market countries' currencies relative to advanced countries' currencies is a central key to this global adjustment."

After a nervous period spending money to stimulate, "advanced" economies including the US and Europe are now debating how to cut back.

The IMF said a pick up in the private sector will not be enough to prevent sluggish growth of around 2.5 per cent in 2011 and 2012.

"In most advanced economies output is still far below potential. Unemployment is high and low growth implies that it will remain so for many years to come," said Mr Blanchard.

With the continued downward pressure of the US housing sector the IMF said the solution for America is to rely less on debt laden consumers and sell more stuff abroad.

Japan's prospects are also unclear in the wake of the earthquake.

Abdul Abiad, Senior Economist with the IMF, said: "Big uncertainty is the length of time it will take until both supply chain disruptions and power disruptions are resolved."

The IMF thinks Japan's growth will dip to 1.5 per cent in 2011 and increase to 2 per cent in 2012. But the Fund admits that even those figures are based on the uncertain assumption that Japan can resolve its energy and supply chain problems within the next few months.

channelnewsasia.com