SAN SEBASTIAN. Spain. July 6: The world economy should grow at 2.5 per cent or more this year as crisis-hit Latin America and Asia recover faster than expected, the head of the International Monetary Fund said yesterday, reports Reuters.

"From what we saw in the first half of the year in the US economy, the recovery of Brazil and its impact on Latin America. the stronger recovery in Asian countries, and better confidence in Europe, all this makes us think that this year could be better." Camdessus told reporters after a seminar in San Sebastian in northern Spain.

"It (world growth) could be 2.5 per cent or maybe even more."

The latest IMF official forecast in April saw 1999 world growth of 2.3 per cent, held back by downside risks from Japan and Europe's sluggish economy.

Camdessus said the last two years had seen the worst crises in the global economy in 50 years.

"We were close to the abyss at the end of 1998," he said.

But now things were looking up.

There are clear indications that the world economy is recovering although in the eurozone it's not yet clear whether demand is strengthening enough to compensate for any slowdown in the US economy," Camdessus said.

He said it was likely that sooner or later Europe would close the gap in growth with the United States, though it was not clear when the United States would end its current period of booming growth which last week prompted a 0.25 percentage point rise in interest rates.

There were also some Signs of recovery in Japan, he said.

Last month Japan reported surprisingly strong 1.9 per cent

growth for the first quarter of 1999 from the preceding quarter. or an annualised 7.9 per cent, its first quarterly growth in a year and half.

"The IMF still doesn't see any growth (in Japan) this year but it expects the first positive data in the year 2000."

He said there were still risks that could dampen world growth next year, but the IMF's 3.4 per cent forecast for 2000 was now much more likely to be reached than it was before.

He added that in 2001 it was possible that the world economy would grow more than 4 per cent, a rate necessary to combat world poverty.

Camdessus said Brazil's surprising recovery from a currency crisis earlier this year should allow for further cuts in punitive interest rates, which have already fallen from 45 per cent just after the crisis to 21 per cent.