Global Economy Reviews
30.12.2007 14:02 World Economy Review - December 2007
The World Bank released figures for its latest estimates of individual country and world GDP. These estimates are based on the International Comparison Program (ICP) of prices conducted in 2005 for 146 countries.
The principal outputs of the ICP are estimates of Purchasing Power Parities (PPPs) benchmarked to the year 2005. PPPs are used instead of exchange rates to convert national economic measures such as gross domestic products into a common currency. By taking account of price differences between countries, PPPs allow comparisons of market size, the structure of economies, and what money can buy.
The report also provides estimates of gross domestic product (GDP) for 146 economies, along with GDP per capita, and their price level index (PLI), which shows which economies are cheapest and which are most expensive when currencies are converted using market exchange rates.
The report showed that twelve economies account for more than two-thirds of the world`s output. Seven of them are high-income economies (United States, Japan, Germany, the United Kingdom, France, Italy and, Spain), and five are developing or transitional economies (China, India, Russia, Brazil, and Mexico). The five largest developing economies account for more than 20 percent of global output and over 27 percent of the world expenditures for investment purposes.
Overall, the 2005 benchmark results showed that the size of the world economy measured in PPP terms is smaller than previous estimates. By that measure, the U.S. share was just 23% of global gross domestic output; China`s economy shrank by 40% to $5.3 trillion, about 10% of global GDP. Under the calculations, India had 4,0% of global GDP, Russia had 3,1%. Also, Russia dominates the CIS regional economy with three-fourths of the total and two-thirds of the investment shares.
Measured by GDP per capita, the five richest economies were Luxembourg, Qatar, Norway, Brunei Darussalam, and Kuwait. Collectively, they account for less than 1 percent of the world`s output. Seventeen economies have a GDP per capita of less than $1,000. The world average is approximately $8,900 per capita.
30.11.2007 23:47 World Economy Review - November 2007
The world economy has been growing more slowly after global unemployment jumped to 6.3 percent last year, the highest in a decade, the United Nations reported in November. Because it is the world`s largest economy, the United States and its weakening housing market are "the major drag for this global slowdown," said the U.N. report.
It puts the expected growth of 2007 world gross product at 3.2 percent, down from an average 3.8 percent a year during the previous decade. "We see a number of worrisome trends," said Sha Zukang, the U.N.`s undersecretary-general for economic and social affairs. "Globally, despite robust rates of economic growth, employment creation is lagging behind growth of the working-age population".
Some 195 million people were unemployed in 2006, an increase that despite continued growth in global economic output is "giving rise to the phenomenon of jobless growth," the report said. The U.N. economists said that for the first time in history, the service industry, accounting for 40 percent of all jobs, overtook agriculture as the biggest employer. "The world is rapidly becoming an economic system with employment dominated by the service sector, in which many jobs are low-paying and precarious and are not covered by formal mechanisms of social protection," the report said.
It said the unemployment rate was highest, at 12.2 percent, in the Middle East and North Africa, followed by 9.8 percent in sub-Saharan Africa, 8 percent in Latin America and the Caribbean, 6.6 percent in Southeast Asia and the Pacific, and 6.2 percent among developed nations` economies.
The International Monetary Fund said Thursday it would likely revise lower its 2008 estimate of world economic growth due to financial market turmoil and surging oil prices. "Global growth in 2008 will likely be lower than we anticipated in the World Economic Outlook," IMF spokesman Masood Ahmed said at a news conference.
01.11.2007 23:07 World Economy Review - October 2007
The International Monetary Fund on Wednesday cut its forecast for global growth next year and warned that even its new prediction might be too optimistic given threats posed by the sell-off in credit markets.
The IMF lowered its projection for the global expansion to 4.8 percent in 2008 in its semiannual World Economic Outlook, from an estimate of 5.2 percent in July. The forecast reflected a weaker outlook for the United States, as the Fund reduced its estimate of U.S. growth to 1.9 percent from 2.8 percent.
Europe, like the United States, has "uncertain prospects for domestic demand," the IMF said, lowering its 2008 growth estimate for the region to 2.1 percent, from 2.5 percent. The euro zone, with 13 members, will probably grow 2.5 percent this year, the Fund said.
In Japan, gross domestic product will increase just 1.7 percent, down from the 2 percent pace estimated in July and 2 percent this year. The Fund said it was incorporating the drop in GDP in the second quarter of this year, driven by lower investment and weaker consumer spending.
The Fund said it expected China to expand by 10 percent in 2008, half a percentage point less than the July prediction. The 11.5 percent pace this year made China, for the first time, the largest contributor to global growth, the IMF said.
Indian GDP will increase 8.4 percent next year, unchanged from the July projection, after an 8.9 percent expansion in 2007. Russia, propelled by exports of oil, natural gas and other commodities, will grow 6.5 percent in 2008, compared with the previous 6.8 percent estimate and 7 percent this year. In Latin America, tighter government budgets have helped "anchor investor confidence," with the main challenge being how to handle an influx of foreign capital. Brazil, the region`s biggest economy, will expand 4 percent in 2008, from the previous projection of 4.2 percent.
29.09.2007 13:09 World Economy Review - September 2007
The 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.
01.09.2007 14:57 World Economy Review - August 2007
The 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.