Academic journal article National Institute Economic Review

The World Economy. (at A Glance)

Academic journal article National Institute Economic Review

The World Economy. (at A Glance)

Article excerpt

* The world recovery will remain weak: global GDP will grow by 3.2 per cent in 2004, the same as in 2003.

* The US economy will grow by 2.5 per cent this year and by 3.5 per cent in 2004

* The Euro Area will grow by 1.2 per cent in 2003, and by 1.9 per cent in 2004.

* The Japanese economy will grow by only 0.8 per cent in 2003 and will experience negative quarterly growth for most of the year.

The outlook for world growth has deteriorated partly because of the impact of higher oil prices in the months before the war in Iraq, partly because of the exchange-rate realignment arising from recent dollar weakness. The overall effect will be to lower growth in the OECD by a quarter of a percentage point in 2003. The bigger impact is to redistribute growth from the Euro Area and Japan to the United States.

The American economy will be sustained in 2003 by loose monetary and fiscal conditions. The recovery will gain strength in 2004 as exports and business investment expand more rapidly. Helped by the fall in the dollar, export growth is forecast to rise from 6.5 per cent in 2003 to 9.1 per cent in 2004. Consumer spending is forecast to grow by 2.1 per cent in 2003 and by 2.4 per cent in 2004 - lower in both years than rises in disposable income of 2.7 per cent and 3.5 per cent respectively. The medium-term threat in the US is a resurgence of inflation, with almost a one-in-twenty chance that it will exceed 5 per cent in 2005. …

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