In an upbeat assessment of the global economy, the United Nations says growth in many countries improved in the latter half of last year and should strengthen further in 2004, though it warned that economic imbalances would also increase.
"After growth of less than 2 per cent for over two years, the world economy is gaining momentum," the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development (UNCTAD) and the UN regional economic commissions say in a joint report, World Economic Situation and Prospects 2004, released today.
Under-Secretary-General for Economic Affairs José Antonio Ocampo told the press at the report's launch at UN headquarters that, compared to the boom years of the 1990s, today's recovery still depends on low interest rates and expansionary fiscal measures. Policymakers should be careful, therefore, not to choke off the recovery through a premature withdrawal of measures designed to stimulate the economy.
The growth of the gross world product rose in the second half of 2003 to bring the annual figure up to 2.5 per cent, and "despite some lingering uncertainties and downside risks," global economic growth should rise to 3.5 per cent in 2004, according to the report.
The UN warns, however, that the "overriding weakness" of global imbalances, shown in the large United States external deficit and matching surpluses in a few other economies, reflect "not only a substantial disequilibrium in international trade and capital flows," but also disparities from country to country. The imbalances will not be corrected by the global recovery, exchange rate realignments, or protectionism and may well widen further in 2004, the report warns.
While global economic recovery is being driven by the US, the report notes China's "rapidly rising weight" in the world economy. The turnaround in Japan has been stronger than anticipated, while the rest of East Asia has remained strong, according to the report. By contrast, Western Europe has been a source of the weakness that began to dissipate only in late 2003.
The economic difficulties facing some Latin American countries have been lessened. While Africa's short-term prospects have improved, the continent is not projected to achieve the 7 per cent annual growth rate needed to achieve the Millennium Development Goals (MDGs), a set of targets designed to halve extreme poverty by 2015.
Video of press briefing