China, U.S. fueling global economic growth
NEW YORK — The American and Chinese economies are jointly supporting global growth — that’s the verdict from the UN’s Department of Social and Economic Affairs annual report. The report does not only cite only good economic grades in the developed countries, but as importantly shows positive growth in the developing countries, the strongest in two decades. And despite the spike in petroleum prices and the current weakness of the U.S. dollar, the world economy has considerable momentum entering 2005.
Growing U.S. consumption has stimulated the worldwide manufacturing sector while the burgeoning Chinese demand for raw materials is improving the markets from commodity-exporting countries as far away as Africa and Latin America.
According to the World Economic Situation and Prospects 2005, demand from China brings higher commodity prices in places as far away as Africa . Thus average 2004 growth in the developing countries of 5.5 percent was the strongest in two decades. Equally positively African growth of 4.5 percent in the same period was not only fueled by higher farm output but stronger commodity prices as well. “Growth was strong in North America, moderate in Japan, and but weak in Europe.”
“The United States continues to be one of the main drivers of global economic growth …GDP for 2004 as a whole a is estimated to have grown by have grown by at least 4 percent,” the Report states adding, “ Consumer spending remains strong, business investment and productivity are increasing, and inflation is low.”
Growth for Western Europe during the same period stood at 2 percent and little improvement was expected this year. Here too a precipitous rise in oil prices as well lackluster consumer spending, have kept the EU gains modest and well as unemployment rates high. The good news here is that new Central and Eastern European members of the EU have reached growth levels of 5 percent in 2004.
The UN survey adds that “one of the universal weakness in the world economy continues the be the slow growth of employment and the persistence of high rates of unemployment.” The U.S. unemployment rate of 5.5 percent for 2004 contrasted with 10 percent in Germany, 9.6 percent in France and 11 percent in Spain. The average Euro zone unemployment rate stood at 8.9 percent.
China has of course been the big story. With GDP growth of more than 9 percent, Beijing is poised not only to act as an East Asian catalyst for development but a global one as well. Under Secretary General Jose Antonio Ocampo described clearly an “element of Chinese led growth in the world today … Africa for example profited from Chinese demand for commodities.” The Mainland Chinese economy grew an estimated 9.5 percent in 2004.
“Chinese demand and a surging world economy, have reversed the longstanding decline in commodity prices,” the report states adding, “Prices of non-oil commodities were driven upward by ten percent in 2004, following gains of 11 percent in 2003.” Such growing demand for raw materials has buoyed markets in both Africa and Latin America. This in fact represent as profound sea change given that in recent years lackluster growth plagued Latin America. The implications for developing countries appear positive.
The shadow of the unpredictable petroleum markets has already hindered worldwide prospects. While the price of oil rose 50 percent in the first half of 2004, the rise being largely the result of a demand surge in China not an output deficit from Middle East producers. While the UN does not discount the “fear premium” in world oil markets, the Report expects a price moderation this year.
Naturally growing U.S. trade deficits and the decline of the dollar pose a genuine challenge for policymakers and can have a ripple effect on the global economy. At the same time positive world economic growth — and especially for the developing countries,
recalls the adage that the rising tides of economic prosperity raises all boats. Continued trade and promoting an enterprise driven culture may keep it that way.
John J. Metzler is a U.N. correspondent covering diplomatic and defense
issues. He writes weekly for World Tribune.com.  |
