Posted on: Thursday, October 10, 2002

U.N. says world's economy slowed by Iraq, stock slump

By Bill Varner
Bloomberg News Service

United Nations — The threat of U.S military action in Iraq and the stock market slump are delaying the global economic recovery from the 2001 slowdown, according to a United Nations report.

"The possibility of conflict in Iraq is a wildcard that has already driven up oil prices, and continued uncertainty will drive prices even higher," UN chief economist Ian Kinniburgh said. "This is a factor in our new forecast."

The U.S. Congress is set to pass a resolution authorizing President George W. Bush to wage war if diplomacy fails to rid Iraq of weapons of mass destruction. Oil traded in New York has risen this year by 48 percent, to $29.26 per barrel.

The world economy will grow 1.7 percent this calendar year, according to 250 economists from 60 countries who contributed to the biennial report. The UN revised its 2002 forecast from 1.8 percent growth in an April report.

The 2003 global forecast has also been revised down, to 2.9 percent growth from 3.2 percent in April.

"The peak of world economic recovery is now not expected until mid-2003 rather than later this year," the report said. Continued decline in U.S. stock prices may "push recovery beyond mid-2003," according to the report.

The U.S. economy is forecast to grow by 2.3 percent this year, instead of the 2.4 percent predicted in April, with growth of 3.2 percent in 2003, a revision down from 3.4 percent.

"The U.S. will continue to lead the global recovery, but not with much momentum," the report said.

Slower 2002 growth than previous UN forecasts is also expected in the economies of the European Union, Japan and Latin America. The EU economy will grow 1.1 percent this year, Japan 1.3 percent and Latin America will suffer a 0.9 percent decrease in its gross domestic product.