Michael Mussa, the former chief economist at the International Monetary Fund now with the Institute for International Economics, Wednesday released a very upbeat global economic forecast. Mr. Mussa believes the world economy is performing at its best level in 20 years.
Mr. Mussa says despite the rise in oil prices the world economy will grow five percent this year, its best performance in two decades. The fastest growth will be in China (8.5 percent) and India (7.5 percent). Mr. Mussa expects growth will fall back to under four percent in 2005.
"Part of the reason my global growth forecast is one and a quarter points lower in 2005 reflects the expected impact of higher oil prices," he noted. "The more important part, however, reflects the normal expectation that you can't keep growth at the highest rate in a generation for very long. Inevitably there is a fall off and we're seeing some of that already."
Mr. Mussa believes China's growth will fall back to 7 percent next year and the United States will slow to 3.25 percent from this year's 4.25 percent.
Mr. Mussa, a former economics professor at the University of Chicago, says Japan's fragile recovery seems to be solid even though growth will fall back in 2005.
"The Japanese economy has been much better than many forecasters had expected, even better than my relatively optimistic forecast," he added. "I think this year we'll see year over year growth of over four percent. That's largely in the bag at this stage. I do expect things to be a bit slower next year."
Europe, among industrial areas, continues to be a laggard with growth in the euro currency zone countries only two percent this year. Africa is doing well with growth more than four percent and Latin America has recovered to more than five percent growth. The Middle East countries, many of which are helped by the rise in oil prices, will register more than four percent growth, their fastest growth in several years.