World growth to slow down to 3.4% in 2001 EIU

["Ulhas Joglekar" <ulhasj@xxxxxxxxxxxxxxxxxxxx>]

16 December 2000

World growth to slow down to 3.4% in 2001: EIU
LONDON: World economic growth will slow in 2001, reflecting an overdue
easing in the booming North American economy, but still remain healthy, the
Economist Intelligence Unit (EIU) said on Friday.
The EIU said in a report the world's real gross domestic product would grow
at 3.4 percent next year after 4.2 percent this year - the fastest since
1984 - and 2.9 percent in 1999.
It said in the report 2001: Country by Country that all this deceleration
would be accounted for by lower growth in North America and western Europe,
which between them made up 50 percent of global output.
The EIU said the biggest single threat to growth in 2001 was a US recession.
It saw a 20 percent chance of this happening.
Economists are anxiously watching to see whether the US economy slows in a
controlled manner - the so-called soft landing - or whether output drops
more sharply, hitting economic prospects across the world.
The EIU said the US economy was suffering from two major imbalances - the
current account deficit and extremely high private-sector borrowing.
It forecast North American growth would fall to 3.2 percent from this year's
5.2 percent. It said moderating US demand growth and the impact of earlier
monetary tightening would see western European growth slow to 3.0 percent
from 3.4 percent.
The fastest growing euro zone country in 2001 would be Ireland at 7.3
percent. Of the bigger countries, France would grow by 3.0 percent, Germany
and Italy by 2.8 percent.
The UK's growth was seen at 2.5 percent.
The EIU said the fastest growing region in 2001 would be the Middle East and
north Africa, with growth picking up to 4.4 percent from 3.6 percent this
year and 2.0 percent in 1999. Large oil-producing countries were starting to
spend again and this would transform the economic outlook, by boosting
corporate profits and the non-oil sector, the report said
North Africa's economic prospects were bright and Algeria and Libya would
also benefit from strong oil revenue.
Latin American growth would pick up to 3.9 percent from 3.7 percent. Brazil
would do relatively well but Mexico would slow with the US, short-term
prospects were good for Chile but less so for Argentina, Colombia,
Venezuela, Peru and Ecuador.
Structural weaknesses, particularly low domestic savings would prevent
growth topping the 5.0 percent rate needed to tackle poverty and social
exclusion.
Asia and Australasia would ease to 3.9 percent from 4.0 percent. Japanese
growth would edge up slightly to 1.9 percent in 2001 but would continue to
drag down the region. An expected slowdown in exports, as US demand slows,
will contribute to moderate growth in the rest of the region.
The transition economies of eastern Europe would see growth fall to 3.8
percent from 4.9 percent, reflecting deceleration in countries such as
Hungary, Poland, Russia and Ukraine.
The EIU said this would be due either to the short-term impact of
restructuring or macroeconomic tightening or because factords underpinning
strong growth this year, such as high oil prices in Russia, were not a basis
for sustainable growth.
Expansion in Sub-Saharan Africa will pick up to 3.3 percent from 2.6
percent. Zimbabwe will be the worst performing country covered in the
report, with GDP fAlling 2.9 percent, followed by Gabon with a 2.2 percent
fall and Comoros down 1.0 percent.
Output increases in most of the southern Africa sub-region are expected to
be relatively healthy but the region's fastest growth would be in the Franc
zone.
Equatorial Guinea would be the world's fastest growing country, with GDP
seen up 15 percent. The EIU said this would be a one-off effect due to the
rapid expansion of its oil sector. (Reuters)
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