With conditions almost everywhere favouring buoyant economies, the global economy is expected to grow by 3.7 per cent this year, even though expansion will slow in the second half of 2004, according to a group of 100 economists from 60 countries meeting at the United Nations in New York.
The group has produced a report, "Global Economic Outlook 2004," under the auspices of Project LINK, founded by Nobel Laureate Lawrence Klein. LINK, which the UN Department of Economic and Social Affairs (DESA) and the Project LINK Research Centre at the University of Toronto jointly coordinate, makes global projections out of the econometric models governments have developed for themselves.
LINK forecasts annual growth in 2004 of better than 4.5 per cent for the United States, slowing to a little over 3.5 per cent in 2005. Given the emergence of China as an Asian economic heavyweight, LINK also questions the role of the US as the sole engine of global growth.
"This locomotive has been powered by resources borrowed from the rest of the world," LINK says. "The current account deficit of the United States, a measure of how much of the spending by the US is financed by borrowing from abroad, is running at more than 5 per cent of GDP."
With the US economic expansion dependent on the willingness of the rest of the world to continue to lend to it by accumulating its assets, "such a cycle of interdependency between the United States and the rest of the world is unlikely to prove sustainable," it says.
In Europe growth of slightly below 2 per cent in 2004 will rise to almost 2.5 per cent in 2005. The United Kingdom's figures exceed these, with growth of 3.3 per cent in 2004 and 2.7 per cent in 2005.
In South and East Asia, the projections are 5.5 per cent in 2004 and 5.2 per cent in 2005. Japan predicts growth of a little over 3 per cent in 2004, which is likely to ease to 2 per cent in 2005. China, which has boosted global demand for commodities and energy, will decline marginally from 8.5 per cent in 2004 to 8.2 per cent in 2005, while India's projection is 6.3 per cent in 2004 and 6.1 per cent in 2005.
Latin America and the Caribbean would produce growth rates of 3.6 in 2004 and 4.1 per cent in 2005. Africa, which the UN has said must reach 7 per cent annual growth to start reducing poverty significantly, will achieve 4.1 per cent in 2004 and 4.8 in 2005, the report says.