The World Economy

National Institute Economic Review, July 2005 | Go to article overview
Save to active project

The World Economy


* Global GDP growth will slow from 5.1 per cent in 2004 to 4.2 per cent in 2005; world trade growth will slow from 9.1 per cent to 6.3 per cent.

* The oil price is expected to remain above $50 a barrel, although in real terms it is well below the highs of the early 1980s.

* Nearly 25 per cent of the deterioration of the US current account since 1997 can be attributed to net trade in petroleum products, and reflects the oil price.

* A 10 per cent revaluation of the Chinese renminbi would have little impact on the US current account deficit.

* Rapid real house price growth will continue to support US housing investment in 2005 and 2006.

Global growth rose well above trend in 2004, and we expect a marked slowdown in most major economies this year. Nonetheless, world GDP is expected to expand by a robust 4 1/4 per cent in both 2005 and 2006. World growth remains unbalanced; the US will expand by 3.9 per cent this year, supported by rapid real house price growth and housing investment, while the Euro Area and Japan will grow by 1.5 and 1.4 per cent respectively.

Strong global growth has continued to put upward pressure on oil prices, which are expected to remain above $50 a barrel throughout our forecast horizon. This, in turn, raises the global inflationary outlook, and average OECD inflation will rise to 2 per cent this year and 2.3 per cent in 2006. Import volumes in major oil producing nations have outstripped export volumes by a comfortable margin since 2002. This points to rapid recycling of oil revenues and suggests that the oil price rise will have a minimal impact on world growth.

The euro effective exchange rate has dropped by 5 per cent since the beginning of the year, reinforcing inflationary pressures in the Euro Area. This will add 0.2 to 0.4 percentage points to Euro Area inflation in 2005 and 2006, and the harmonised consumer price index will rise by 2.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

The World Economy
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?