World economic growth forecasts revised downward

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In its latest review, the Paris-based Organization for Economic Cooperation and Development said the world's 30 largest economies should grow by 2.2 percent in 2003, compared with 1.5 percent in 2002.

The new figures are a downward revision from the group's mid-year report, which had projected 1.8 percent GDP growth in 2002 and 3.0 percent growth next year.

The International Monetary Fund also trimmed its expectations for global growth in its latest World Economic Outlook because of increased risks since last spring.

The IMF had forecast the global economy would grow by 2.8 percent in 2002, up only slightly from 2.2 percent growth the year before, which had been the worst performance in a decade.

Besides concerns of the growing impact of the U.S. and European stock market declines, the economy also could be hurt by a war with Iraq, a jump in oil prices and a possible destabilizing plunge in the value of the dollar, the IMF said.

The World Bank also has cut its forecast for world economic growth to 2.5 percent for 2003 from 3.6 percent projected six months ago, and said that the expansion remains vulnerable to shrinking investment and rising oil prices.

Major regions:

United States

Global growth in 2003 depends critically on the United States.

Most economists now expect the U.S. economy to grow about 3 to 3.4 percent in 2003, slightly above the estimated 2.7 percent growth in 2002, with real economic momentum not expected until the second half of the year.

The World Bank estimates the U.S. economy will grow 2.6 percent next year after 2.3 percent this year.

Asia

Most economies are expected to remain sluggish early in the new year, though some experts predict things will pick up later in 2003 or at worst by 2004.

As always, Asian nations are dependent on stronger U.S. demand for their exports.

"We will look for the U.S. to begin to lead in a slow resumption of growth that accelerates, so that by the end of next year we're pretty much prepared in 2004 for a return of potential growth on a global basis," said Cliff Tan, director of Asian economics for Citigroup in Singapore.

The Asian Development Bank upgraded its Asian growth forecast for this year to 5.6 percent from its previous forecast of 5 percent in September.

The bank, however, lowered its forecast for 2003 to 5.6 percent from 5.7 percent.

The bank said the "major risks" faced by Asian economies next year include oil shocks from a possible war in Iraq and new terrorist threats. Other dangers are that consumption may not be sustained in the United States and some Asian countries, and that deflation could lower output, employment and demand in the region.

The Oct. 12 terrorist bombing in Bali, Indonesia, that killed more than 180 people could have "serious implications" for Indonesia and the rest of Asia because of the effect on tourism.

Tourism accounts for about 9 percent of Asia's gross domestic product and 7 percent of employment. It employs about 6 million people in Indonesia and accounts for about 9.9 percent of the country's economy. Eight percent of its exports are tourism-related.

The bank forecasts China's economy, already Asia's fastest-growing, to expand 8 percent in 2002 but slow to 7.2 percent in 2003.

Indonesia, Malaysia and Singapore will grow faster in 2003 because of sustained domestic demand, while Thailand and the Philippines are expected to slow, it said.

India, the only South Asian country for which a projection was available, is seen expanding 5.5 percent in 2003, up from the projected 5 percent growth of 2002.

Europe

The European Central Bank has sharply cut its projections for 2003 economic growth in the 12 countries using the euro, citing "persistently high uncertainty" over financial markets and political developments.

The bank cut its projection for the coming year's growth in the sluggish euro zone to 1.1 to 2.1 percent for the full year, from its earlier figures of 2.1 to 3.1 percent. It also cut its outlook for 2002 to 0.6 to 1.0 percent, from 0.9 to 1.5 percent. Growth was 1.5 percent in 2001.

While most business confidence indicators in the Euro zone have stabilized, Germany is struggling with widening budget deficits and lower tax collections from the slow economy.

The nation of 82 million people, and Europe's biggest economy, has been mired in near-zero growth for more than a year. Unemployment, which reached 9.7 percent in November, tops the 4 million jobless mark. The government has slashed its 2002 growth forecast to 0.5 percent from 0.75 percent.

Latin America

Economic turbulence in South American giants Brazil and Argentina set the tone for a rocky year in Latin America — where the economy shrank by 0.5 percent in 2002 — and the uncertainty will continue in 2003.

Brazil's new president, former union boss Luiz Inacio Lula da Silva, takes office Jan. 1 with promises to create jobs, feed Brazil's 50 million poor and revive the continent's largest economy.

But Silva also has pledged to generate a budget surplus, meet payments on Brazil's $264 billion foreign debt (in U.S. dollars)and curb inflation that has soared to 10 percent, an eight-year high.

Argentina is groping for ways to solve the most severe economic crisis in its history, after a year marked by a $141 billion debt default, a 70 percent devaluation of the peso and unemployment that has left one in five Argentines jobless.

Paraguay is nearly broke, Uruguay is mired in a three-year recession, and Venezuela, which has the largest oil reserves in the western hemisphere, is wracked by a political struggle to oust populist President Hugo Chavez.

The World Bank says Latin America's economy will probably expand 1.8 percent in 2003 after its first contraction in two decades this year.