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2008: Global Economic Ensemble

2008/4/17 11:17:00 23

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2008: Global Economic Duet.

The World Bank recently released the 2008 global economic outlook, which has made a penetrating analysis of the current global economy and forecasted the economic trend of various regions in the coming years and the financial risks they faced.

Facing the turbulence of world financial market, China and other developing countries and economies will maintain strong growth momentum.

Economies will be buffered in the development of global landslides.

In a gloomy economic forecast of the global economic theory, the world bank's latest report points out that the sustainable development of developing countries and economies such as China will effectively buffer the world economic downturn caused by the subprime mortgage crisis.

In 2007, the growth rate of industrial production in developing countries, especially in East Asia, generally increased (20% over the same period last year).

Robust production data are also reflected in the GDP results, while the economic performance of China and India is the most prominent. China's economic growth rate in 2007 and this year will be 11.3% and 10.8% respectively, while India will be 9% and 8.4% respectively.

The subprime mortgage crisis in the United States has limited impact on China's real economy.

China has huge foreign exchange reserves, rapid growth in fixed assets investment, upgrading its own export structure, and the adoption of an expansionary fiscal policy, which can resolve the adverse impact of US subprime lending on China's real economy.

In 2007, the GDP growth in East Asia and the Pacific is estimated at 10%, and China is more than 11%.

The region's growth rate is expected to slow to 9.7% in 2008 and 9.6% in 2009.

The turmoil in the world financial centre may have little impact on most economies in the region.

The resilience of developing economies will cushion the current slowdown in the US. The actual GDP growth in developing countries will slow to 7.1% in 2008, and the high-income countries will show a moderate growth of 2.2%.

The economic development of developing countries, especially the sustained and rapid development of China's economy, can effectively alleviate the problems in the economies of developed countries.

But China needs to be vigilant against overheating.

Oil prices fell back into expected inflation worries.

"International crude oil prices may slow down this year, as record crude oil prices inhibit global demand for crude oil."

The world bank is forecasting when assessing global inflation.

Due to soaring energy prices, various degrees of inflation occurred in different parts of the world in 2007.

According to World Bank estimates, the average consumer price rose by 1.8% in developed countries in 2007 and 5.9% in developing countries.

Looking ahead to 2008, the trend of oil prices still affects the nerves of the global economy.

"If we look at the fundamentals of the economy carefully, we will see that there is a downward trend in oil prices."

Hans Timo, one of the report's authors and head of the global trend group of the world bank development forecasting group, said: "we expect that oil prices will continue to decline more or less."

In 2007, inflation pressures in developed countries were in a controllable state, providing space for central banks to ease monetary policy.

Among them, the Fed's concern over the possible recession of the US economy has exceeded the fear of rising inflation pressure, so the benchmark interest rate has been cut 3 times since last September, from 5.25% to 4.25%.

In view of the fact that the economy has not been completely out of deflation, the Central Bank of Japan has been keeping interest rates unchanged since February when the benchmark interest rate increased from 0.25% to 0.5% in 2007.

In addition, euro area inflation continued to fluctuate near the upper limit set by the European Central Bank last year, and the recent upward trend is even more evident.

However, considering the slowdown in European economic growth and the continued appreciation of the euro, the ECB will continue to maintain its current 4% interest rate unchanged.

Compared with developed countries, the inflation situation in developing countries is quite different.

Among them, inflation pressures in the Middle East, North Africa and sub Saharan Africa have increased, while inflation levels in East Asia, South Asia, Latin America and Central Asia are fluctuating, but generally stable.

The World Bank forecasts that the average international crude oil price in 2008 will be around $84.1 a barrel, and oil prices will drop by 6.8% to 78.4 dollars per barrel by 2009.

Crude oil averaged $71.2 a barrel last year.

"From the perspective of demand, the impact of high oil prices has begun to show."

"In high income countries, the demand for crude oil is no longer increasing," he said.

High oil prices and the gradual increase of environmental awareness in various countries will inhibit global demand for crude oil.

In the long run, oil prices are expected to gradually drop to around $50 a barrel.

Nevertheless, the crude oil market is very unstable. "Any external shocks can lead to huge changes".

Global economic soft landing risks uncertain

The spectre of the US recession, the weakening of the US dollar and the increase in financial market turmoil have cast a shadow over the soft landing of the global economy.

These risks will reduce the export earnings and capital inflows of developing countries and reduce the value of their overseas dollar investments.

Under such circumstances, it may be necessary to use the reserves and other buffer mechanisms established by developing countries for years to absorb unexpected shocks.

"In general, we expect that the growth rate of developing countries will slow down in the next two years," said Yuri Dadush, director of the world bank development forecasting group and the director of the International Trade Bureau.

However, a sharp slowdown in the US is a real risk and may weaken the medium-term prospects of developing countries. "

In fact, the recent strong growth in developing countries has pushed commodity prices up, notably oil, metals and ore.

This has benefited many commodity exporters, resulting in strong demand growth in some poorer countries.

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