Prospects for global economic recovery for 2002 'anaemic,' UN report forecasts

Prospects for global economic recovery for 2002 'anaemic,' UN report forecasts

International economists are predicting an "anaemic" growth rate in gross world product for 2002, with hard-hit Latin America suffering an overall decline for the year, according to a global forecast released today at the United Nations.

The Global Economic Outlook predicts that the world economy will grow only 1.7 per cent in 2002, and less than 3 per cent next year. The gross domestic product (GDP) of Latin America is expected to decline by 0.9 per cent for the year, according to the report, published under Project LINK, a co-operative, non-governmental international research activity jointly coordinated by the UN Department of Economic and Social Affairs and the University of Toronto.

The recovery process is not only more sluggish than previously anticipated but also subject to additional uncertainties, including the impact of heightening geopolitical tensions in the Middle East, a decline in equity prices, especially in the United States, and general agreement that the longer US external deficits continue, the greater the risk of an abrupt correction and a shock to the world economy.

Meanwhile, the latest debt crisis in Argentina underlines the risks that may arise from financial fragility and debt overhang within nations. "The spill over effects of the Argentine crisis have, over time, been more significant than was originally expected," the report states.

While monetary- and fiscal-policy stimuli, resilient consumer spending and inventory restocking continue to support the recovery, tepid business capital spending and increasingly lower equity prices continue to drag down global economic growth, according to the report.

The current LINK baseline outlook shows that the US economy will continue to lead the global recovery, but not with much momentum. Economic recovery in Japan and Western Europe continues to rely chiefly on external demand.