The world economy [October 2002]

Low, Kenneth (2002) The world economy [October 2002]. Quarterly Economic Commentary, 27 (3). pp. 10-13. ISSN 0306-7866

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Abstract

The risks to the world economy are now perhaps greater than in the previous quarter with the added tensions of a potential conflict in the Gulf. On the up side there are clear signs of a slow but steady recovery in the US and the UK despite the dip caused by the stock market correction. We expect growth in the Euro Area to pick up following a more sustained pattern of growth in the US towards the end of this year and into 2003. The US appears to have a slow sustained recovery in place that has been hampered by a significant stock market correction. Economic performance is forecast to be considerably better in 2003. There are still risks to the economy including further falls in equity prices. On balance however the outlook for the US looks relatively promising. The recovery in Europe is weaker than expected but the economic situation is improving. Inflationary pressures remain weak while external demand is beneficial to growth prospects. Unemployment remains relatively high. Japan continues to be a serious concern for the world economy particularly the persistent deflation and the underlying weakness of the financial sector. As we warned in the last Quarterly Economic Commentary a significant stock market correction has taken place, adversely affecting economic growth across the globe. War with Iraq will increase oil prices and this may significantly add to inflationary pressures, depending on the length of any conflict.

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