A new U.N. report forecasts continued robust global economic expansion this year. The report by the U.N. Economic Commission for Europe says the economies of the former communist countries of eastern Europe and the former Soviet Union are doing particularly well.
The U.N. report says global economic expansion is expected to increase by four percent this year. This is slightly lower than world output in 2004. It says the United States and China will continue to act as locomotives for the world economy.
Despite this overall favorable global outlook, the report says the downside risks changed for the worse during the first half of this year.
It says the threats to continued economic growth include rising oil prices and the further widening of global external imbalances. It says a sharp reversal in increasing housing prices in a number of countries, notably the United States, could add to the risks.
U.N. economist Robert Shelburne says rapid economic growth in the United States has coincided with a big decline in the Federal Budget deficit. He says, right now, the large budget deficit is not a major problem. But, he warns this is likely to change.
"The problem is more that in the long run, given the demographics, there is going to be a problem in financing the retirement benefits and so forth and that, therefore, this period of time should be one in which the country should be accumulating surpluses to cover those future deficits," he said. "But, the actual deficits right now are fairly sustainable for a period of time. But, are not desirable."
The report notes the gap between growth in the United States and other major industrialized economies will widen in 2005. It says the Gross Domestic Product of Western European countries is expected to grow by only 1.7 percent compared to 3.5 percent for the United States.
Senior U.N. economist Abdul Chowdhury says the contrast is even sharper when compared with, what he calls, the persistent economic dynamism of eastern Europe and the countries of the former Soviet Union.
"The short-term outlook for the new European Union member states from central Europe and the Baltic States remains generally favorable," he said. "Both in 2005 and 2006, the rates of growth in most countries are likely to remain significantly higher than those of the old European Union member states. In both years, the average rates of GDP growth in the EU-10, as a whole, will be about four percent."
Despite some slowdown, U.N. economists expect a continued strong performance in the economies of the former Soviet Union. In Russia, they say, the rate of GDP growth will be in the range of five and six percent throughout this and the coming year. Even former sluggish economies such as Belarus and Kazakhstan, they say, will continue to grow between five percent and eight percent.