1、The Global Economic Outlook,Presented to: ICAS Fall Symposium 2003 Washington, D.C. October 14, 2003Presented by: Sara Johnson Managing Director, Global Macroeconomics Group,Copyright 2003 Global Insight, Inc.,Copyright 2003 Global Insight, Inc.,2,World Overview and Issues,The world economys perform
2、ance in this cyclemarked by subpar, stop-and-go growthhas been disappointing. The U.S. rebound is lifting the rest of the world, but the pace of recovery will be uneven across regions. World real GDP growth will pick up from 2.3% this year to 3.3% in 2004. Global output will remain below potential.
3、Weak domestic demand, inflexible policies, and currency appreciation are holding back Western Europe and Japan. Asias expansion, disrupted by SARS, is regaining strength, led by growth in the technology sector.,Copyright 2003 Global Insight, Inc.,3,Sluggish Growth in the World Economy,(Percent chang
4、e, real GDP),The world economy is in recession when real GDP growth is below 2%.,Copyright 2003 Global Insight, Inc.,4,OECD Leading Indicators Are Rising,(Trend-restored composite index),Copyright 2003 Global Insight, Inc.,5,Industrial Commodity Prices Are Recovering,(Index, 2002:1=1.0),(Index, 2002
5、:1=1.0),Includes energy,Copyright 2003 Global Insight, Inc.,6,Fiscal and Monetary Policies Will Boost Growth,Copyright 2003 Global Insight, Inc.,7,Emerging Markets Achieve the Fastest Growth,(Percent change, real GDP),Copyright 2003 Global Insight, Inc.,8,The U.S. Expansion Broadens,The U.S. economy
6、 has been expanding since late 2001, but not rapidly enough to create jobsuntil this September. Consumer spending has steadily risen, supported by tax cuts, low interest rates, and the stock market rally. Housing markets have peaked but remain strong. Business fixed investment stabilized in mid-2002
7、 and has begun a phased recovery, led by information technologies. With the inventory-to-sales ratio at a record low, businesses will need to step up production in the months ahead. Exports are starting to rebound in response to the dollars depreciation, neutralizing the impact of rising imports. Fe
8、deral fiscal stimulus outweighs the adverse effects of state and local government budget cuts and tax increases.,Copyright 2003 Global Insight, Inc.,9,The U.S. Expansion Is Strengthening,(Percent change, annual rate),(Percent),Copyright 2003 Global Insight, Inc.,10,Employment Is Finally Beginning to
9、 Recover,The U.S. lost 2.8 million jobs from February 2001 to August 2003.,(Percent change, annual rate),Copyright 2003 Global Insight, Inc.,11,Federal Reserve Policy Will Be Accommodating: Key Interest Rates,(Percent),Copyright 2003 Global Insight, Inc.,12,Government Budgets Are Back in Deficit,(Bi
10、llions of dollars, fiscal years),Copyright 2003 Global Insight, Inc.,13,Real Consumer Spending and Confidence,(Annual percent change),(Michigan Index, 1967=100),Copyright 2003 Global Insight, Inc.,14,Monetary Policy Has Stabilized Home-Building,(Housing starts, millions of units),Copyright 2003 Glob
11、al Insight, Inc.,15,An Uneven Recovery in Business Investment,(Percent change, 1996 dollars),Copyright 2003 Global Insight, Inc.,16,Real U.S. Exports and Imports Reflect the Business Cycle and Exchange Rates,(Year-over-year percent change),Copyright 2003 Global Insight, Inc.,17,The Widening U.S. Cur
12、rent Account Deficit,(Billions of dollars),(Percent of GDP),Copyright 2003 Global Insight, Inc.,18,The U.S. Dollar Is Still Overvalued,(Real Trade-Weighted Dollar Index, 1996=1.0),Copyright 2003 Global Insight, Inc.,19,Canadas Economy Depends on U.S. Trade,Consumer spending, home-building, and publi
13、c investment are leading Canadas expansion. Exports have declined in 2003, however, in response to currency appreciation, Torontos outbreak of SARS, and beef and lumber trade restrictions. The Canadian dollar has appreciated in response to a trade surplus and attractive interest rates spreads. Yet,
14、it remains below its PPP value of 81 U.S. cents. Favorable financing terms and pent-up demand have lifted home-building to unsustainable rates. Housing starts will fall in 2004 and 2005. Energy and infrastructure projects will support growth in nonresidential construction.,Copyright 2003 Global Insi
15、ght, Inc.,20,Canadas Real GDP Growth Begins to Lag,(Percent change, 1997 dollars),Copyright 2003 Global Insight, Inc.,21,Mexico: Stability Under NAFTA,Mexico has achieved remarkable macroeconomic stability under NAFTA. Cautious monetary policies have lowered inflation to from 35% in the mid-1990s to
16、 4% today. Mexicos sluggish recovery is led by consumer spending and government-funded construction. Manufacturing remains weak, awaiting a rebound in exports. Capital inflows and an overvalued peso have hurt competitiveness against emerging markets, notably China. President Foxs reforms are stalled
17、 by Congressional opposition, discouraging needed private investments. Construction of subsidized housing and infrastructure (water, power transmission, roads) remain priorities.,Copyright 2003 Global Insight, Inc.,22,Mexicos Real GDP Growth Disappoints,(Percent change, real GDP),Copyright 2003 Glob
18、al Insight, Inc.,23,South America Recovers But Risks Are High,Argentinas economy is turning around as exports respond to a 65% peso depreciation. But full recovery will take a decade and risks remain high under another Peronist government. Brazil faces conflicting challengesrevive growth, subdue inf
19、lation, meet debt payments, and improve social conditions. High interest rates are undermining the domestic economy. In Venezuela, recovery from a deep recession will not arrive until President Chavez leaves office, perhaps in 2004. Chiles economy will accelerate sharply in 2004 as a free trade agre
20、ement with the U.S. takes effect and exports strengthen. Perus strong economic growth is threatened by social unrest.,Copyright 2003 Global Insight, Inc.,24,Real GDP Growth in South America,(Percent change),Copyright 2003 Global Insight, Inc.,25,A Delayed Upturn in Western Europe,Europes recovery is
21、 lagging. Unemployment is near 9% and confidence remains depressed. A strong euro, uncompetitive labor costs, and cautious policies have undermined growth. Once inflation falls below 2%, the European Central Bank is expected cut its key rate from 2.0% to 1.5% by early 2004. Tax cuts will provide add
22、itional stimuli under a more flexible application of the Stability and Growth Pact. An aging population, inflexible labor markets, costly pension systems, and anti-immigrant sentiments will limit long-term economic growth to 2.0-2.5%. Enlargement of the European Union will divert investment to acces
23、sion countries, but could become an impetus to reforms.,Copyright 2003 Global Insight, Inc.,26,Eurozone Confidence Remains Weak,(Balance of respondents giving positive and negative replies),Copyright 2003 Global Insight, Inc.,27,Real GDP Growth Rates in European Countries,(Percent change),Copyright
24、2003 Global Insight, Inc.,28,Slow Progress in Japan,The economys acceleration in 2003 reflects broad gains in real exports, consumer spending, and business investment. Japans economy suffers from several long-term problems: asset deflation, bad bank loans, rising government debt, ineffective monetar
25、y policies, and structural inefficiencies. A more expansionary monetary policy has emerged, easing the pain of restructuring in the banking and industrial sectors. The Bank of Japan will intervene in currency markets to keep the yen from appreciating beyond 110 per dollar. Deflation is expected to e
26、nd in 2005. Japans long-term real GDP growth trend is only 1.8%; the countrys population will peak in 2007.,Copyright 2003 Global Insight, Inc.,29,Japans Economy Has Limited Growth Potential,(Percent change, real GDP),Copyright 2003 Global Insight, Inc.,30,Other Asia/Pacific: A Bright Spot,Asias rap
27、id growth is led by a boom in exports and high-tech industries. Monetary and fiscal policies are accommodating. The SARS outbreak briefly curtailed travel and retail trade, with Hong Kong, Singapore, Taiwan, and China most affected. In South Korea, consumer spending and home-building have retrenched
28、 after the borrowing binge of recent years. Chinas strong expansion is driven by foreign direct investment, exports, and public infrastructure spending. WTO accession is forcing China to reform its inefficient state enterprises and banking system, raising unemployment. China, Hong Kong, and Malaysia
29、 will benefit from dollars depreciation. By 2006, China will be forced to revalue.,Copyright 2003 Global Insight, Inc.,31,Real GDP Growth in Asian/Pacific Economies,(Percent change),Copyright 2003 Global Insight, Inc.,32,South Koreas Real Economic Growth by Sector,(Percent change),Copyright 2003 Glo
30、bal Insight, Inc.,33,Real GDP Growth in Other Asian Economies,(Percent change),Copyright 2003 Global Insight, Inc.,34,The Rise of China,Copyright 2003 Global Insight, Inc.,35,Greater Chinas Expanding Role in World Trade,* Export totals from China, Hong Kong and Taiwan exclude trade with each other.
31、Source: Global Insight World Industry Service,(Percent share of world manufacturing exports),Copyright 2003 Global Insight, Inc.,36,Other Emerging Markets Are Growing,(Percent change, real GDP),Copyright 2003 Global Insight, Inc.,37,Emerging Europe Is Attracting Investment,Despite weak export market
32、s, economic growth is picking up in Central Europe, Russia, and the Ukraine. Eastern European countries are attracting foreign investment in anticipation of accession to the European Union. Falling trade barriers, low costs, and privatization will spark industrial development in Romania, Bulgaria, a
33、nd Croatia. Azerbaijan, Kazakhstan, and Turkmenistan will achieve high growth rates as a result of oil and gas development. Russia, the Ukraine, and Kazakhstan are introducing market reforms, but corruption and weak financial systems will impede non-energy investment.,Copyright 2003 Global Insight,
34、Inc.,38,Middle East and Africa Face Several Obstacles,The Iraq war, the Israeli-Arab conflict, and fears of terrorism have undermined tourism and investment. Near-term strength in oil export revenues will support public spending in the Middle East and North Africa. Iraqs long-term economic outlook i
35、s bright but risky; the country is rich in natural resources. Oil productionpotential to reach 5 mmbd Agriculturefertile land, water from Tigris & Euphrates TourismShiite holy cities of Najaf and Karbala Capital flight, the AIDS epidemic, and political instability hinder growth in Sub-Saharan Africa
36、.,Copyright 2003 Global Insight, Inc.,39,A Unique Global Business Cycle,The past recession was triggered by an investment bubble that led to excess capacity and reduced returns on capital. The manufacturing recession was deep and global. Deflation became a greater concern than inflation. Expansionar
37、y fiscal and monetary policies cushioned the downturn. Consumers kept spending and housing markets boomed. A succession of shocks impeded recoveryterrorist attacks, corporate governance scandals, the Iraq war, SARS. Investment will recover as excess capacity is cleared and profitability improves. This process will lead to sustainable economic growth in 2004 and beyond.,Copyright 2003 Global Insight, Inc.,40,Thank you!,Visit our web site at ,
