Hopeful sign: a convergence of growth
When the powerful economic policymakers and financial leaders of the major industrial nations met in Dubai last month, they vowed to stoke the fires of world economic growth.Skip to next paragraph
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Guess what? Economic flames have already been flaring up. The world's three most important powerhouses are growing significantly - a convergence not seen in 20 years. And stock markets have reacted accordingly, finally giving investors around the globe something to smile about.
While it's too soon to call these developments a boom, it's beginning to look as though the expansionary policies of governments and central banks in the United States, Japan, and Europe are bearing fruit.
What can keep the growth going? Economic reform, finds a new study. Over the long time, efforts by nations to adapt "best economic practices" in business regulation and social policies may speed world economic progress.
At the moment, what is significant for the world economy is that the current economic revival includes the United States, Japan, and probably the laggard members of the 12-nation European Monetary Union (EMU). It's a synchronous world expansion.
"The world economy may have turned the corner," says Horst Köhler, managing director of the International Monetary Fund.
After three years of doldrums, world gross domestic product (GDP) - the output of all goods and services in every nation - looks poised to reach a record $32.2 trillion this year. That's roughly a 2.2 percent growth spurt, up from last year's 2 percent growth.
Next year, the picture looks even better. World GDP should grow about 3 percent in real terms, predicts Nariman Behravesh, chief economist of Global Insight, a consulting firm in Waltham, Mass.
That's quite a turnaround. Japan's economy has been in the doldrums for a decade. Germany, France, and Italy have been close to a recession. Their economies had been restrained by a tight central bank monetary policy - loosened somewhat recently.
"We are probably past the worst," says Richard Reid, an economist in London with Citigroup, a major investment bank.
Germany, Europe's biggest economy, should have 2 percent real growth next year, forecasts Ralph Solzeen, an econo-mist with Commerzbank in Frankfurt. That upturn will partly be due to several national holidays falling on weekends in 2004, rather than work days.
The nations of the European Monetary Union, with the euro as a common currency, will grow 1.5 percent next year, says Mr. Behravesh.
Britain, outside the EMU, should enjoy 2.5 to 3 percent real growth, predicts Mr. Reid. The British economy is already performing well, with a jobless rate at a 50-year low of 3.2 percent.
Japan's economy has been growing about as fast as that of the US this year, though Behravesh wonders if Japanese statistics overstate growth and the amount of deflation.
Growth is also popping up elsewhere. Non-Japan Asia could grow at a 5 to 7 percent clip. Canada, Australia, and Central and Eastern Europe should continue to see respectable growth. Latin America should pick up, as Argentina rebounds after four years of trouble, Brazil recovers from recession, Venezuela halts its downhill plunge, and Mexico benefits from the US recovery.