Growth Slows down in the Industrialised Countries, Picks up in the Other Regions. Medium-term Prospects for the World Economy
Any projection of global economic developments up to 2005 will greatly depend on an assessment of a number of problem areas: • Will the oil price, after first rising at a breakneck pace, drop again significantly, or will it stay at its high level over the medium run? • Will the imbalances induced by the rise in energy prices cause growth in global trade to collapse, as was the case after the two oil price shocks in 1973-74 and 1979-80? • How will economic policy respond to the combination of a weakening economy and accelerating inflation? • How will this affect the dollar and euro rates of interest, the rates of exchange, world trade prices and thus the real rate of interest for international dollar debts? • Will growth dynamics in the industrialised countries be characterised by marked differences between the triad countries (USA, EU and Japan), as was the case in the 1990s? Considering that OPEC members are showing more discipline in their production and are more efficient in their co-operation with other oil producers, the oil price should not fall off much by 2002 and should then rise again to $ 26. The declining dollar exchange rate and greater vigour of the global economy as of 2002 should in turn boost the dollar prices for other raw materials and industrial products. Altogether, global trade prices should rise by 2.9 percent p.a. up to 2005. At an average dollar interest rate of 4.2 percent, the real interest rate for international dollar debts should be just 1.3 percent in 2000-2005. This will give a break to the interest service of debtor countries, which reduces the likelihood of international financial crises. In view of the higher energy prices, oil exporters and the former centrally planned economies will see their import demand surge (by 11.9 and 10.2 percent p.a., respectively); other developing countries should increase their imports by 9.3 percent. Industrialised countries, on the other hand, are expected to expand their imports by just 5.7 percent, mainly as a result of their deteriorating terms of trade in the wake of the rise in oil prices. Up to 2005, industrialised countries are projected to boost their exports by 6.2 percent p.a., oil exporters will increase theirs by 4.0 percent, other LDCs by 9.1 percent and the former centrally planned economies by 7.2 percent. Accordingly, the total world trade volume should grow by 6.9 percent p.a. between 2000 and 2005. Consequently, the trade imbalances, which widened by the rise in oil prices, will be gradually cut down again. In 2000-2005, deficits in the industrialised countries should decline by about $ 115 billion, and surpluses in the oil exporting countries plummet by $ 134 billion. Anticyclical monetary and fiscal policies and a slight devaluation of the dollar will help the U.S. economy to recover in 2002 and to expand by an average of 2.7 percent annually up to 2005. In the European Union, GDP should grow at a slightly lower rate (+2.5 percent p.a.), since the economy will take more time to recover from its setback. Growth will be particularly low in Germany (+2.1 percent p.a.). Japan will see its economy grow by just 1.3 percent p.a. up to 2005. Altogether, industrialised countries should be able to amplify their GDPs by 2.3 percent p.a. over the next five years. Oil exporting countries should see their GDPs grow by 4.0 percent p.a., other LDCs by 5.8 percent, and the former centrally planned economies in Eastern Europe by 4.2 percent. Global economy would thus expand by 3.9 percent p.a. in 2000-2005, markedly faster than in the 1990s.
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