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IMF cuts India growth forecast for 2011, 2012

Soaring oil prices and inflation in the emerging economies that were a welcome source of stability during the financial crisis pose dangerous new risks to the world economy, the International Monetary Fund (IMF) said on Monday.

The global lender's latest assessment of global economic prospects marked a departure from recent years when its focus was on the potential peril from a near-financial meltdown and recession in advanced countries.

The fastest growth in recent years has come from emerging markets like China, Brazil and India, which helped offset the deep downturns in the United States and other rich nations touched off by burst housing bubbles.

Now, the IMF warns those very economies risk asset bubbles akin to the ones that sparked the 2007-2009 financial crisis; "The challenge for many emerging and some developing economies is to ensure that present boom-like conditions do not develop into overheating over the coming year," the IMF said in its World Economic Outlook report.

The IMF highlighted the searing impact that rising food and commodity prices posed to poorer countries. Soaring costs for basic stapes stoked the social and economic tensions that have roiled the Arab world. Street protests have toppled dictatorships in Egypt and Tunisia, and left leaders in Yemen and Libya fighting to cling to power. The fund said inflation pressures were likely to build in developing countries as people pushed for higher wages in the face of pricier food and fuel.

Somewhat surprisingly, the IMF said it saw little lasting impact from the triple disaster -- earthquake, tsunami and nuclear crisis -- that struck Japan last month. It revised down its 2011 forecast for growth in the world's third-largest economy only slightly and raise its projection for 2012.

Speaking of advanced economies collectively, the IMF said a slow-paced recovery was continuing and that risks of a "double-dip" recession had decreased. But it said unemployment remained stubbornly high and not enough action was being taken to ratchet down budget deficits in the United States and elsewhere.