GENEVA — Driven by the recovery in the U.S, Japan and the U.K., world economic output is projected to grow 4.7 percent this year, compared with previous predictions of 4.1 percent, according to a U.N. Economic Commission for Europe report.
In the U.S., “supported by strong domestic demand and exports,” gross domestic product is forecast to increase by 4.7 percent in 2004, faster than last year’s 3.1 percent rate, said the study, which was released last week.
The economic survey by the 55-nation group, based here, said the U.S.’s expansion “appears to be well established as job creation has picked up.” The U.S. is a commission member.
“Private consumption remained the mainstay of the recovery, boosted by strong growth in disposable incomes and by improved prospects for employment,” the report said.
The commission’s chief economist, Abdur Chowdhury, said the projections are subject to risks and uncertainties, such as possible terrorist attacks on major oil networks in the Middle East, with subsequent upward pressure on oil prices.
Another risk, he said, is a stronger-than-expected rise in inflationary pressures that could lead to a more pronounced tightening of monetary policy, especially in the U.S.
The huge current account deficit of the U.S. also poses a major risk unless the imbalance — which the report noted is not sustainable — is not corrected, Chowdhury said. He noted that the rising trade deficit could take a toll on world exchange rates.
In the first quarter of 2004, the U.S. current account deficit reached a record $149 billion, up from $127 billion in the final quarter of 2003, the ECE said.
Growth in the European Union’s older 15 member nations will average 2 percent in 2004, with the U.K. posting an above-average 3.1 percent rise and the EU’s 10 newest members, mainly from Eastern Europe, surging ahead by an average of 4.5 percent.
In Asia, the ECE estimated Japan will grow by 4.1 percent in 2004, faster than last year’s 2.5 percent rate. The report also noted that in China, GDP increased by 9.8 percent in the first quarter of 2004.