The United Nations has issued an upbeat assessment of the world economy, noting that growth in developing countries is at its fastest pace in more than two decades. The positive outlook is tempered by concerns about global trade imbalances.
The world's economy has considerable momentum at the beginning of 2005, and short-term prospects remain positive. That is the main conclusion of the annual U.N. economic report.
The 125-page report notes that the cyclical recovery of the world economy is reaching its peak. Worldwide economic growth increased by four percent in 2004, and, says the U.N., is likely to grow almost as fast in the next 12 months.
The top U.N. economist, former Colombian finance minister Jose Antonio Ocampo says every region in the developing world is showing rapid economic growth.
"…with of course East Asia in the lead, but Latin America, which came from negative growth in 2002 to very positive growth last year. We can also see Western Asia, which had been growing at relatively low rates in 2002, and very interestingly sub-Saharan Africa, which has been accelerating every year, and last year reached four and a half percent growth, which is very positive of course in light of recent historical experience," he said.
He says the emergence of China as an economic powerhouse alongside the United States has been positive, guaranteeing good commodity prices for producers in developing countries.
Mr. Ocampo's report shows two areas of the developing world where growth declined last year as compared to the year before, South Asia and in developing states of the former Soviet Union. But in both cases, growth was still at historically high levels.
In the developed world, economic performance was more varied. North America's growth is considered strong, Japan's moderate, and the European Union, with the exception of some of its new members, is relatively poor.
Mr. Ocampo says such "global imbalances," as he calls them, are among the most worrisome danger signs for the future. The main imbalance he points to is the coincidence of higher U.S. trade deficits with large surpluses in Japan, the European Union and many parts of the developing world.
He says the decline of the U.S. dollar will help ease the imbalance, but could also force a slowdown in growth in the rest of the world.
“The depreciation of the U.S. dollar is not enough,” he added. “It may actually be worsening one of the sources of the trade imbalance of the U.S. It is quite clear that one of the major sources of the U.S. trade imbalance is the faster rate of growth of the U.S. vis-à-vis other industrial economies, and the U.S. dollar depreciation will actually worsen that problem, due to the fact that it makes the U.S. more competitive whereas it makes Europe and Japan less competitive.”
The U.N. report says high rates of unemployment in the developing world are another area of concern. It says the continued slow growth of employment is making it difficult to reduce poverty.
On the positive side, the report predicts no major damage to South Asian economies from the tsunami that struck last month. U.N. economists say economies in the region should grow at a 6.25 percent rate, almost unchanged from pre-tsunami estimates.