While the geo-political environment has cast a shadow over the global economy's prospects, the likely victory by the US and its allies in Iraq, more stable financial markets and an oil price of US$26-27 a barrel from mid-year should provide a platform for a strengthening in world economic growth, according to ANZ's June quarter
2003 Economic Outlook.
Under such a scenario, which will be assisted by a very expansionary monetary and fiscal policy, world economic growth is forecast to strengthen from around 2.9% in 2003 to 3.9% in 2004.
A number of outstanding geo-political issues, however, could threaten a sustainable recovery in global economic growth, including North Korea and retaliatory terrorist attacks, the bank notes.
"There is also the fall-out from the bursting of the 1990s economic bubble to contend with; all which suggest that the risks to the global economy are on the downside and that monetary policy settings in most countries will remain highly supportive of growth for some time."
In addition, Westpac senior international economist Huw McKay says the outbreak of Severe Acute Respiratory Syndrome (SARS) will slow the growth rate of Asian economies.
McKay believes the impact will be insufficient to push the region's economies into recession, but it will have a "material" impact on growth rates in Asia.
"Our analysis, in combination with anecdotal evidence from the region, suggests that if the worst effects of SARS have not subsided by mid-year, up to 1 percentage point could be shaved off ASEAN growth rates in 2003," he says.
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