World economic growth seen fastest in 16 years
Reuters, London
World economic growth is likely to accelerate this year to 4.7 per cent, topping the peak of the technology-led boom of 2000 to its fastest rate in 16 years, according to UK-based think-tank Economist Intelligence Unit.The EIU, which calculates its forecast assuming equal purchasing power for world currencies, revised up its forecast from 4.6 percent in March and said its latest call would now see the globe outstrip the 4.6 percent rate it estimated for 2000. Rising world trade would be a key driver, it said, and raised its 2004 forecast for trade growth to 7.9 percent from 7.5 percent last month. Trade expanded 5.1 per cent last year. "The global economy looks set to expand even more rapidly than it did in 2000, the peak of the last business cycle," the EIU said. "Although most regions of the world are experiencing faster growth, the US, China, India and Thailand -- among others -- are expanding exceptionally quickly." The EIU's 4.7 percent growth forecast for this year is a significant jump from the 3.8 percent growth rate seen in 2003. It expects the world to cool slightly in 2005 to 4.1 percent. The forecast is a tenth of a percentage point higher than that of the International Monetary Fund, which expected a 4.6 percent world expansion this year in its World Economic Outlook last week. One region that will continue to under perform is the euro zone, the EIU said. It said it cut its 2004 growth forecast for the single currency bloc to 1.6 percent from 1.8 percent in March, even though this was still an acceleration from 2003's meagre 0. 4 percent expansion. As a result of its forecast revisions and amid speculation about a rise in US interest rates this year, the EIU revised its dollar forecast higher too. It said it now expects an average 2004 dollar rate of $1.27 per euro, compared to $1.30 previously, and it expects an average rate of $1.36 next year. The EIU said risks to its 2004 forecasts, which had included a sharp dollar slide and a retrenchment in private sector demand, had receded somewhat. But it said these were now a bigger risk in 2005 as tighter monetary and fiscal policy could hit both the consumer and US financial markets hard. Despite the rising market jitters, the economists said they expect official US interest rates to remain on hold until early 2005.
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