The World Economy

By Pain, Nigel | National Institute Economic Review, October 2000 | Go to article overview

The World Economy

Pain, Nigel, National Institute Economic Review

Section I. Recent economic developments

Global demand has risen significantly this year, with GDP growth projected to have accelerated to 4 3/4 per cent per annum (on a purchasing power parity basis) from 3 1/2 per cent per annum last year and 2 1/2 per cent in 1998. This will be the fastest rate of global growth seen since 1984. These peaks in the rate of global economic expansion coincide with those for growth in the United States, indicating the extent to which the world economy depends on the health of the American economy. Virtually all economies are likely to enjoy faster growth this year than in 1999, as indicated by Chart 1. Output growth in the OECD is projected to have accelerated from 3 per cent last year to between 4 1/4-4 1/2 per cent this year. Growth in the non-OECD countries is projected to have accelerated from 3 3/4 per cent last year to between 5-5 1/4 per cent this year. [1] The growth of world merchandise trade volumes is estimated to be over 12 per cent this year, more than twice the rate seen in 1998 and 1999.

The principal factor behind the recent buoyant levels of activity has been the lagged effects of the global relaxation in monetary policy in the aftermath of the emerging markets crises in 1997-98. This acted to prevent a financial collapse, and also raised liquidity and sentiment significantly. Strong growth in equity markets also helped to ease financial conditions further. The global economy has also continued to benefit from the rapid expansion in domestic demand in both the United States and Canada, led by double-digit rates of growth in business investment expenditure. Despite the record longevity of the present economic cycle in the United States, economic growth is projected to be around 5 1/4 per cent this year, with the acceleration from 1999 accounting for approximately one-fifth of the overall acceleration in world economic growth this year.

Buoyant external demand, along with lower real exchange rates and higher commodity prices have acted to encourage strong cyclical upturns in Asia, and more recently Brazil and Russia. Growth in Asia (including Japan) is projected to reach 6 1/4 per cent this year, in line with the average growth rate achieved in the first half of the 1990s. In Japan itself the manufacturing sector appears to have recovered, but the non-manufacturing sector remains subdued and GDP growth is likely to continue to disappoint, at around 1 1/2 per cent this year and 2 per cent in 2001. The Euro Area economies are however enjoying a significant recovery, led by strong external demand as a result of the weak euro, with growth projected to be 3.6 per cent per annum this year and 3 1/4 per cent in 2001. Looking ahead, all the forces that have recently acted to support global activity appear likely to moderate and we expect growth to slow, particularly in the industrialised economies. Short-term interest rates have been raised by 2 1/4 percentage points in the Euro Area since last November and by 1 3/4 percentage points in the US since the summer of 1999. Even in Japan, where there has yet to be clear evidence of a lasting economic recovery and price deflation is continuing, the Bank of Japan has recently ended its zero interest rate policy. Given the lags with which monetary policy operates, the full impact of these changes will emerge only over the course of the next year. The combination of the rise in oil prices and the recent weakening of global equity markets will, if sustained, also act to slow growth significantly, especially in North America. Global GDP growth is projected to moderate to around 4 per cent per annum next year and 3 3/4 per cent in 2002. The deceleration next year is entirely accounted for by developments within the OECD, but is projected to spread to the developing economies by 2002.

The rise in oil prices over the past two years has a number of potentially important effects on the global economy. In the short-term it involves a significant change in regional savings and investment balances, with the oil exporting countries gaining export revenue and the (net) oil importing countries experiencing a deterioration in their trade balance. …

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

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.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The World Economy


Text size Smaller Larger Reset View mode
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?

Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    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.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.