29.09.2007 13:09 World Economy Review - September 2007The International Monetary Fund has sharply cut its forecast for 2008 economic growth in the United States and made a more modest reduction in its outlook for the euro zone, Italian news agencies reported. Citing a draft version of the IMF`s Economic Outlook to be released next month, news agency AGI said the IMF slashed its 2008 U.S. growth forecast to 2.2 percent from 2.8 percent, largely due to the fall-out from the crisis of the subprime mortgage sector.
The IMF`s forecast for the euro zone has been trimmed to 2.3 percent from a previous 2.5 percent projection, AGI and several other Italian news agencies reported. The IMF`s growth forecast for Germany was cut to 2.2 percent from 2.4 percent, the agencies said, while France`s growth was left unchanged at 2.3 percent and Italy`s was trimmed to 1.6 percent from 1.7 percent. The IMF left its forecast for this year`s Italian growth at 1.8 percent.
Also in September, the U.S. Federal Reserve cut official interest rates by a half-percentage point last week, saying it wanted to try to forestall some of the impact of a credit squeeze, which policy-makers fear will take a toll on both U.S. and global expansion. As a result, the euro rose as high as $1.41, bringing its gains since January to around 7.0 percent. The dollar index held near a 15-year low set in September.
The analysts said the U.S. interest rate cut can curb rates in other countries, increasing inflation pressures. Particularly, the international oil price that was forecasted to assume an upward curve due to a fall in the interest rate, followed by a possible end of global economic slowdown and a weak dollar, can play a role in impeding progress of the world economy.
Also, a fall in the U.S interest rate can trigger other currencies including the won to grow stronger against the dollar. We all know what a strong won can do to our exports and the overall economy.
Furthermore, a deep cut in the U.S. interest rates can accelerate liquidation of yen-carry funds worldwide that are estimated to mount up to $80-500 billion. From a long-term perspective, it can be another risk factor in the international financial market. full version... 01.09.2007 14:57 World Economy Review - August 2007The Organization for Economic Cooperation and Development (OECD) area GDP grew 0.6 pct in the second quarter, the same growth rate as recorded in the first quarter, the OECD said.
US growth accelerated to 0.8 pct in the second quarter from 0.2 pct in the first, but this was offset by slowdowns in the euro zone and Japan. Euro zone growth eased to 0.3 pct from 0.7 pct and Japan`s growth figure slowed to 0.1 pct from 0.8 pct.
OECD area GDP grew 2.5 pct year-on-year in the second quarter, compared with a year-on-year rate of 2.6 pct in the first quarter. The euro zone accounted for 0.7 percentage points of the 2.5 pct OECD area year-on-year growth rate, with the US contributing 0.6 points, Japan 0.3 points and other countries 0.9 points.
The World Bank`s chief economist forecast that world economic growth would slow in 2007 but said the possibility of a crisis would diminish if the global economy could weather the next few weeks.
Francois Bourguignon, senior vice president at the multilateral lender, said the deceleration in world economic growth this year should not have a deep impact on developing nations, where the bank focuses its development lending.
"We expect some slowdown in world economic growth this year," he said, adding that this would likely trim between 0.3 and 0.4 percentage points from growth in developing nations.
"Last year, developing economies grew by 6.5 percent, so this year we are looking at just over 6 percent," he told Reuters during a visit to West Africa to discuss the World Bank`s ongoing strategic policy review. "Growth is still likely to be strong next year," he said. full version... 01.08.2007 20:50 World Economy Review - July 2007Global factory growth eased in July, while production growth slipped to a six-month low, an indicator compiled from national surveys of manufacturers showed.
The Global Manufacturing PMI, produced by JP Morgan with research and supply management organisations, slipped to a four-month low of 53.1 in July from 54.4 in June. That is still well above the 50.0 level that divides growth from contraction.
Activity was held back by a gear down in the rate of expansion for production and new orders, with the output index hitting a six-month low of 54.3 from 57.5 the previous month. "The July PMI data suffered a significant setback, all but reversing the impressive uptrend since the turn of the year," said David Hensley at JP Morgan. He said it pointed to sluggish gains in industrial activity through the summer months.
Employment growth also cooled, with that index hitting 51.7 in July from 52.6 the previous month. The index combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia.
Manufacturing in the U.S expanded in July at close to the fastest pace in more than a year as factories received more orders from overseas. The Institute for Supply Management`s factory index slipped to 53.9, lower than forecast, from 56 in June, the Tempe, Arizona, group said. The index matched 2006`s average and any figure higher than 50 signals expansion.
The eurozone`s seasonally adjusted purchasing managers` index (PMI), compiled by NTC Research, was revised up to 54.9 from a provisional estimate of 54.8 but still well down from 55.6 in June and the weakest reading since February 2006.
The International Monetary Fund (IMF) has raised its world economic growth forecast for 2007 and 2008 to 5.2 per cent, up 0.3 per cent from the 4.9 per cent growth forecast for both years in its World Economic Outlook (WEO), published in April. The IMF hiked the growth forecast by 0.3 percentage points on the back of robust growth in emerging markets, with China poised to become its most powerful growth driver. Under the revised estimates, China will see growth of 11.2 per cent in 2007, 1.2 percentage points higher than forecast in April. The IMF also revised India`s growth rate upward by 0.6 points to 9.0 per cent, and Russia`s to 7.0 per cent. The US growth forecast for 2008 was left unchanged at a 2.8 per cent. For Japan, the world`s second-biggest economy, the IMF raised its growth forecast to 2.6 per cent in 2007, up 0.3 percentage points, and to 2.0 in 2008, up 0.1 point. In Europe, the IMF expects the 27-nation euro to expand at a faster rate of 2.6 per cent in 2007 and 2.5 per cent in 2008, up 0.3 points and 0.2 points, respectively. full version... 01.07.2007 18:07 World Economy Review - June 2007Russia is likely to revise its GDP growth forecast upwards as it should reach 7 pct in 2007, Russian media reported Economic Development and Trade Minister German Gref said in June. "Soon from now, we`ll see our GDP forecast raised from 6.5 pct to 7 pct for 2007," - he said. "In the first five months this year GDP has risen 7.7 pct year-on-year," - he said.
Also in June, the White House lowered its official forecast for economic growth to 2.3 pct for 2007 from 2.9 pct predicted six months ago. The forecast is compiled by the White House Council of Economic Advisers, the White House Office of Management and Budget and the Treasury Department.
That 2.3 pct growth depends on the expected rebound from quite weak growth in the first quarter. "A variety of indicators signal a faster-growing US economy for the rest of the year", - said CEA Chairman Edward Lazear. "Unemployment remains remarkably low, business inventories are lean compared with sales, and now industrial production is on the rise".
France`s statistics office Insee forecasts 2.1 pct GDP growth for 2007, down slightly from the 2006 growth figure of 2.2 pct, although supported by continuing solid domestic demand.
The Insee GDP figure, given in its quarterly report on the French economy, is marginally lower than the OECD`s estimate of 2.2 pct GDP growth for 2007 and government estimates of 2.25-2.5 pct, and compares unfavourably with the European Commission forecast of 2.4 pct growth. Economy of Eurozone is forecasted to grow by 2.6 pct in 2007.
Japan`s GDP will grow 2.1 pct this year and 2.3 pct next year, the government said. GDP of China is forecast to grow 10.8 percent from a year earlier, the fastest rate since 1995, according to the report of the People`s Bank of China. full version... 02.06.2007 14:32 World Economy Review - May 2007A report by the Organization of Economic Cooperation and Development (OECD) published on May 24 says that the world economy is not in for a decline. Despite certain risks, it is growing faster than in the past.
In 2007 and 2008, the economy of the 31 OECD countries would experience a growth in GDP of 2.7%, according to the OECD forecast. Germany would continue to experience strong growth, with GDP set to expand by 2.9% in 2007, and there would be `soft landing` in the US after several boom years. Growth in the US economy was slowing down from 3.3% in 2006 to 2.1% in 2007. Predicted growth for 2008 was 2.5%. Thanks to recovery in Germany and Italy, the Euro zone would experience a growth rate of 2.7% in 2007. In 2008, the predicted growth of 2.3% was above potential growth of 2%.
The Germany economy`s expansion rate would be 2.2% in 2008, 0.6 percentage points above potential growth rate. Growth would remain solid in Japan for 2007, up to 2.4% compared to 2.2% in 2006. Growth in China and India would be buoyant, the report predicted. However, it also warned of risks posed by imbalances in current accounts and, possibly, in financial and housing markets.
The OECD also predicts that Russia will develop more slowly, but still faster than many other countries, and the growth of prices will be much less significant. They believe in 2007 Russia`s GDP will stand at 6.5%, which is the same as in the two previous years. But in 2008, the economic growth will slow down to 5.8%. The inflation, which will slow down to 6.5% for objective reasons by 2008, is making its own contribution to economic stability. full version...
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