Slowing global economy to keep expanding on recovery in USA and China

15-Feb-05

The World Bank sees global economic expansion slowing in 2005 to 3.2% from an estimated 4% in 2004. Factors contributing to the slower pace include high and volatile oil prices that have cut into incomes - thus moderating demand in many countries - a decline in investment growth due to higher interest rates, and concerns about the growing U.S. trade deficit. The global economy is slowing, but it will likely keep expanding on the basis of a recovery in the U.S. and Chinese economie The World Bank predicts developing countries will turn in the strongest economic increase since 1974, expanding by 6.1%. In the developing world, economic strength is led by China, predicted to achieve growth of 8.8% in 2004, and India with expansion projected at 6.0%. Led by China and India, developing countries are expected to enjoy solid growth- of 5.4% in 2005. Asia is predicted to lead the global economic race - though Japan is facing a slowdown with 2.1% growth. Helped by India, East Asia is expected to remain the world's fastest growing region with 7.1% growth in 2005. The United States economy - with 3.3%, is expected to outrun Europe. For the 12-nation euro zone, the Paris-based global economic think tank reduced its forecast for economic expansion to 1.9% from the 2.4% earlier predicted. The OECD said persistently high oil prices and the rising euro were weighing on European exports to North America and China. Although oil has fallen from its highs of $55 a barrel in October, the OECD said increased global demand, especially from emerging economies like China, meant oil prices would stay well above 1990s levels for the long term. In Asia, China's economic boom is expected to continue to power fast expansion throughout the region, despite efforts by Beijing to slow 9% growth to a more sustainable level by cutting public spending and bank lending, and raising key interest rates. Strong exports and domestic demand in the country of 1.3 billion are boosting trade throughout the region, a trend likely to continue as long as U.S. and European consumers continue to snap up made-in-China products.