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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: tradermike_1999 who wrote (2996)	4/10/2001 6:22:47 PM
From: westpacific	Respond to of 74559

World Growth Expected to SLOW - UN report Tuesday April 10 5:13 PM ET World Growth Expected To Slow By EDITH M. LEDERER, Associated Press Writer UNITED NATIONS (AP) - The global economic slowdown triggered by a slumping U.S. economy is expected to push world economic growth down to 2.4 percent this year, with at best a modest recovery going into 2002, according to a U.N. report based on research from more than 60 countries. Three years after the 1997-98 international financial crisis, the U.N. Global Economic Outlook said the world economy is experiencing another period of turbulence which is hitting countries most closely tied to the U.S. economy hardest - Mexico, Canada, and some East Asian nations including Malaysia and Thailand. The U.N. report predicted that economic growth will fall from 4 percent last year to 2.4 percent this year - with a rebound to about 3 percent next year dependent on a number of factors, first and foremost the economic recovery in the United States. ``The biggest risk for the global economic outlook would be a deeper and longer downturn in the United States, and a larger spillover to the rest of the world,'' it said. The report predicted no recession for the United States, but said economic growth for the first half of 2001 might turn out to be flat. An expected rebound in the second half of the year should give boost U.S. economic growth by 1.5 percent, down sharply from the 5 percent growth rate recorded in 2000, it said. For developing countries, the report forecast a slowdown in economic growth from 5.7 percent in 2001 to 4.4 percent in 2001, with a rebound to 5.2 percent for 2002. The strong performance of 5.9 percent growth in 2000 for countries making the transition to market economies can't be sustained, it said, and growth will drop to 3.6 percent this year. Nobel economics laureate Lawrence Klein, who heads the expert group from more than 60 countries that meets twice yearly to discuss world economic issues and prepare the outlook report, told a news conference that the U.S. Federal Reserve (news - web sites) deliberately engineered the slowdown of the U.S. economy by raising interest rates. The Fed, which sets monetary policy, didn't want the U.S. economy growing at 5 percent, a rate that would generate inflation, he said. ``And they in a sense put on the brakes - and putting on the brakes it looks as though they did it too hard and too long,'' said Klein, a professor at the University of Pennsylvania. ``What they did had to be done ... (but) it looks as though they overdid it.'' The panel said the other two global economic powerhouses - Japan, which has the second-largest economy, and Europe - don't have the strength to make up for the U.S. slowdown. After a decade-long stagnation, Japan registered slow growth of 1.7 percent in 2000. The most recent indicators point to a sharp downturn, however, and the economy is expected to grow by less than 1 percent this year, with only a marginally higher pace for 2002, the report said. In contrast, many European economies remain resilient, with growth expected to moderate from 3.3 percent in 2000 to 2.7 percent this year. It will bounce back to more than 3 percent next year - but still not enough to counter the U.S. downturn, it said. Prof. Peter Pauly of the University of Toronto, a member of the expert group, said the challenge now is for the major global economic players to take ``decisive policy action to turn this from what might be a fairly prolonged growth reduction in the world economy into a short-lived experience.'' ``That will require decisive monetary policy action both in the United States and Europe and it will probably require quite fundamental structural change in Japan,'' he said. Klein said he doesn't expect ``a long, drawn-out recession'' in the United States, though the recovery may be gradual. The expert group expects the U.S. Federal Reserve to lower interest rates at its May meeting, and possibly even earlier, ``and the May meeting may not be the last lowering,'' he said. The U.S. Congress is also debating a $1 billion-plus tax cut, which Klein said should bolster the economy and limit the period of low economic growth. The panel also called on the European Central Bank, which raised interest rates through last October, to lower its rates quickly to spur the economy.