World Economy to Grow 2.75% in 2003: UN Report

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Last updated at: (Beijing Time) Friday, January 10, 2003

World Economy to Grow 2.75% in 2003: UN Report

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The world economy is expected to pick up steam in the second half of 2003 and will growby 2.75 percent for the year, higher than a 1.7-percent expansion in 2002, according to a UN report issued Thursday.

But in the developed countries, falling equity values and weak business spending are constraining economic recovery, with weak and volatile equity prices contributing to the erosion of consumerand business confidence, the report said.

The report noted that a prolonged depression in major equity markets could trap the global economy in a protracted period of low growth or even send it into a tailspin.

The gradual world economic recovery underway is held hostage toa number of imminent risks, and policy makers have limited room for maneuver in response, UN analysts warned Thursday in an assessment of year-ahead prospects.

"Despite the 2001-2002 shakeout in equities and tech investment,impediments to a decisive return to strong world economic growth in 2003 and beyond remain, in the form of overcapacity, overvaluedasset prices, shaky investor confidence and macroeconomic imbalances," they said in the report on World Economic Situation and Prospects 2003.

Because the United States remains the main engine of the globaleconomy, the sustainability of the large US trade deficit and the value of the dollar pose another major downside risk for the worldeconomy, the report said.

An added complication comes from rising geopolitical tensions in West Asia, which have already pushed up oil prices and dampenedbusiness and consumer confidence. If military action were to take place in West Asia, it "would be a further brake on world economicgrowth," the report warned.

"The United States will continue to lead the global recovery, but without significant momentum," the report said. "With domesticdemand lacking vigor, economic recovery in Japan and Western Europe continues to rely chiefly on external demand and will remain fragile."

Most other countries continue to be afflicted by the overall weakness in the world economy. But in contrast, the report said, domestic demand in China has been important not only in sustainingthe country's own high growth during the global slowdown but also in providing some stimulus to exports from other countries, particularly in East Asia.

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