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Global economic report card: E. Asia 'most dynamic', U.S. still the 'locomotive'


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By John Metzler
SPECIAL TO WORLD TRIBUNE.COM

Tuesday, January 16, 2007

UNITED NATIONS — The global economy has continued to grow, but at slower pace.

That’s the verdict from the UN’s economic monitor who cautions that last year’s 3.8 percent global growth will decelerate to 3.2 percent in 2007. The good news remains that economic expansion remains robust in developing countries, especially in Africa, so the overall picture has become more balanced.

Importantly the United States economy, the global powerhouse, will see a slowdown from the impressive 3.2 percent growth in 2006 to 2.2 percent this year. The downturn in the housing market remains a primary culprit for the American economy which in turn will have a negative knock-on effect worldwide. Significantly the Report adds, “No other developed economy is expected to emerge as an alternative engine for the world economy, as growth in Europe is forecast to slow to around 2 percent and in Japan to below 2 percent in 2007.”

“The United States is also the main locomotive for world trade,” according to the UN’s “World Economic Situation and Prospects 2007,” the United States demand for imports grew by twelve percent to an estimated $2.2 trillion in 2006. In other words U.S. purchases from overseas are invigorating markets in nearly every corner of the world. The U.S. remains a major exporter with the fastest growing destinations for American products going to oil producing states and Latin America.

“Asia remains the most dynamic part of the developing world,” according to Jose Antonio Ocampo Under Secretary General for the UN’s department of Economic and Social Affairs. Japan’s growth reached 2.5 percent in 2006 but is expected to slowdown to 1.7 percent in 2007.

Clearly East Asia gets the best marks for economic growth. Export-driven growth saw the region reach 7.6 percent expansion largely due to Mainland China’s booming economy. Yet even without Beijing’s buoyant statistics, other countries in the region averaged 5.3 percent. China’s 10.2 percent growth in 2006 is expected to slip to 8.9 this year. Hong Kong’s economy remained robust with 6.2 percent growth, through Taiwan slipped to 4.1 percent.

The much feared major Avian Flu outbreak in Asia failed to materialize and the effect of higher oil prices did not significantly effect the world economy. “Oil prices have not been a major constraint to economic growth” according to Jose Antonio Ocampo.

Africa has seen overdue improvements with impressive growth in some countries and but staggering and politically inspired reversals in others. While oil rich Angola and Equatorial Guinea have witnessed impressive expansion, other resource rich countries such as Zimbabwe have endured a rapid erosion of economic standards due largely to socialist government policy.

Economic recovery continues apace in the European Union with 2.5 percent growth. Germany seems out of the economic doldrums with 2.5 percent growth in 2006. New EU members have achieved admirable rates with the Czech Republic at 6.5 percent, Latvia and Estonia at 10.5 percent, and Poland at 5.3 percent. In the aftermath of state socialism, many Central European countries have encouraged business investment code and a free enterprise culture which has profoundly improved living standards.

In South Asia, India continues to impress with 7.7 percent growth in 2006 and 7.9 expected this year. Pakistan equally has reached 6.5 percent in 2006 but will moderate to 6.2 this year. Still here the Report warns “Despite the robust growth performance, unemployment rates in South Asia are broadly unchanged, and substantial under as well as unemployment remain problems in all countries.”

The World Report stresses that the European Union has become the biggest host for Foreign Direct Investment (FDI ), pulling in 45 percent of the global inflow. But the United States regained the lead as the largest FDI recipient among all countries overtaking the United Kingdom.

Interestingly Overseas Development Assistance (ODA) continues to play an important global role. The U.S. remains the largest single source with $27 billion given in 2005 with Japan second at $13 billion. The European Union countries combined though donated an impressive $56 billion in 2005, with France, Germany and the United Kingdom the major aid donors.

Though the world appears to have dodged the torpedo of sustained higher petroleum prices, a maze of regulations, bureaucracy and high taxes, and often political instability continues to serve as constraints on economic freedom and enterprise in developed and developing countries alike.


John J. Metzler is a U.N. correspondent covering diplomatic and defense issues. He writes weekly for World Tribune.com.