The International Economy.

• Author: Fratianni, Michele
• Position: Statistical Data Included

Economic growth around the world in 1999 rose above trend, as the effects of the 1997 Asian crisis were unwinding. The year 2000 looks even better. The International Monetary Fund forecasts world economic growth at 4.7 percent, one and half percentage point above 1999 growth. Both the advanced and developing economies are contributing to this performance, with the former marching at 4.7 percent and the latter at 5.6 percent. Clearly, booms are becoming increasingly synchronized; and with this synchronization comes the fear that rising inflation may prompt monetary authorities to reduce money growth and raise short-term interest rates. To complicate matters, the world is suffering from an oil price shock similar in size to the one that took place at the end of the seventies. The convergence of business cycles and the oil price shock represent the most significant risk to this year's forecast.

Consensus Forecast

The International Monetary Fund projects that the world in 2001 will be growing at 4.2 percent, down a half percentage point from 2000 growth. The advanced economies are forecasted to grow at 3.2 percent--down one percentage point from 2000--and the developing countries at 5.7 percent--virtually unchanged from last year. The Economist's poll of forecasts (see Table 1) suggests that the world has now many growth locomotives, in contrast to last year when the United States and the 11 countries that have formed the European Monetary Union (France, Germany, Italy, Spain, Portugal, Belgium, Luxembourg, Netherlands, Austria, Finland, and Ireland) were pulling the world train of economic growth.

Table 1 The Economist's Poll of International Economic Forecasts

Current Account Balance Consumer Percent GDP Prices of GDP 2001 2000 2001 2000 2001 2000 U.S. +5.2 +3.5 +3.3 +2.9 -4.3 -4.2 Japan +1.9 +2.1 -0.6 0.0 2.6 2.4 Euro 11 +3.5 +3.1 +2.2 +1.9 0.2 0.4 Canada +4.8 +3.4 +2.6 +2.4 9.0 1.1 U.K. +3.0 2.7 +2.4 2.5 -1.6 -1.8 China 8.0 7.6 n.a. n.a. 1.6 1.1 India 6.4 6.4 n.a. n.a. -1.3 -1.3 Indonesia 4.1 4.2 n.a. n.a. 5.8 4.5 Malaysia 8.4 5.6 n.a. n.a. 11.6 7.7 South Korea 8.7 5.9 n.a. n.a. 1.6 0.8 Argentina 1.5 2.9 n.a. n.a. -4.0 -4.2 Brazil 3.8 4.1 n.a. n.a. -3.9 -3.6 Mexico 6.6 4.4 n.a. n.a. -3.4 -3.9 Russia 6.2 4.7 n.a. n.a. 17.8 11.1 Source: the Economist 14 October 2000

The United States is still going strong. For 2001 the percentage increase in real GDP is projected to fall towards trend values. Stock market and consumption developments are...