IMF thinks emerging markets like China are overheating and coming to inflation

A top International Monetary Fund official warned this week that overheating is threatening to the emerging economies that powered the global recovery because of the too fast growth.

Emerging markets like China and Brazil made every effort to contain inflation and seize heavy flows of investments. IMF’s first deputy managing director, John Lipsky said that the fund is increasingly concerned about the excessive growth.

"For the emerging economies, growing at 6.5 to 7 percent, their margins of excess capacity have been largely used up, and as a result we're starting to see incipient signs of overheating," Lipsky told.

While developed markets sluggishly followed behind emerging economies took their pace and powered the global recovery after slump of 2008 and 2009. In spite of low interest rates across the advanced countries investors focused on developing world which though brought the capital it provoked the risk of inflation.

Rising oil prices have compounded the inflation problem, but Lipsky said the IMF has not cut its growth forecast because it thinks the oil price spike will prove temporary.

He said until unrest spread to oil-producing Libya, much of the rise in oil prices in late 2010 and early 2011 reflected an improved economic outlook. However, the latest worries about supply disruptions created a "fear factor" that drove oil above $100 a barrel, which if sustained would pose a bigger threat to growth.