Global economy surges in 2004...but imbalances continue to mount

Accra, Jan. 15, GNA - World Economic growth is expected to accelerate to 3.5 per cent in 2004, the United Nations (UN) said on Thursday.

It said the growth would also be spurred by low interest rates and stimulated fiscal measures in the United States especially, and by the rapid rise of China as a major importer, as well as export powerhouse. Developing country growth rates, in general, are picking up in the wake of expansion in the major economies, according to the UN World Economic Situation and Prospects for 2004, which was released to the however, nearly all economies experienced an increase in unemployment or under-employment in the past few years of global slowdown, and employment always lags other aspects of a recovery.

"As the recovery still depends on low interest rates and expansionary fiscal measures, policymakers should be careful not to choke off the recovery or prospects for needed job growth through a premature withdrawal of stimuli or precipitate tightening," said Under-Secretary-General for Economic and Social Affairs Jose Antonio Ocampo at a press launch at United Nations Headquarters in New York. But continued and growing international imbalances, manifested in the large United States external deficit and matching surpluses in a handful of other economies, also pose a serious threat, United Nations Economists warned.

How the imbalances eventually unwind "will have profound implications for the future stability, efficiency and equity of the world economy," the Beginning-Of-The-Year Economic Overview, said. A realignment of exchange rates, as has been advocated in some quarters, is unlikely to prove effective in correcting imbalances and could produce adverse effects, according to the Report.

It said the temptation to deploy protectionist measures should be avoided to lessen current account deficits and to protect jobs. Job growth is hampered largely by domestic cyclical factors, as well as the need for structural reform in some countries, rather than by the transfer of employment to developing countries.

A preferable adjustment process would involve co-ordinated policy actions to narrow structural growth differentials among the major economies, as well as international co-operation to facilitate sustained growth in the developing countries and thereby improve demand overall.