Academic journal article National Institute Economic Review

The World Economy

Academic journal article National Institute Economic Review

The World Economy

Article excerpt

* The outlook for world growth has improved with 2.5 per cent growth now expected in the OECD this year.

* Inflation will rise from a 40-year low of around I per cent in the OECD to 2 per cent p.a. in 2000-01.

* The euro zone economy will pick up speed in 2000 with growth rising to 2.7 per cent and an increase in inflation to 1.5 per cent.

* Japan will grow by less than 1 per cent p.a. in both 1999 and 2000.

* The main risk to the world economy is a sudden collapse in equity markets: a 20 per cent decline in prices would reduce growth in 2000 by 1 percentage point.

Global economic prospects have brightened with OECD growth now expected to be half a percentage point higher in 1999 than seemed likely at the start of the year. As world economic activity picks up, so inflationary pressures will re-emerge, but these will be modest in comparison to the past.

Output in the euro area is set to stage a robust recovery, thanks to low interest rates and gains in competitiveness from the decline in the euro. The euro real effective exchange rate has fallen to levels not seen for fifteen years. …

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