With 2003 barely a week old, UN forecasters have revised downward their global economic growth forecast for the year and predicted that war against Iraq could further set back economic recovery.
The slow pace of growth seen last year is expected to continue throughout the first half of 2003 and pick up only in the second half, with growth for the full year hitting 2.75 per cent, the UN Department of Economic and Social Affairs said in its latest forecast.
That is slightly below the 2.9 per cent annual growth rate it forecast just three months ago. The world economy grew at a tepid 1.7 per cent rate in 2002, the department said in its latest forecast, entitled "World Economic Situation and Prospects 2003."
World trade, on the other hand, will grow at a respectable 6.25 per cent rate this year after just 1.9 per cent growth in 2002, the United Nations said. That is significantly stronger than the 5.7 per cent forecast for 2003 issued in October.
While the possibility of war in Iraq has already damaged growth prospects by creating uncertainty, denting consumer confidence and driving up oil prices, "an escalation into military action would have even more profound negative economic consequences," the latest UN forecast said.
The extent of the damage would depend on how a military campaign unrolled and how long it lasted, it said.
The report said the US economy, the world's largest, would likely remain the locomotive of global growth for a large number of countries this year and predicted it would continue to lead the global recovery, "but without decisive momentum."
Weak domestic demand in Western Europe and Japan would again leave those economies heavily reliant on external demand for growth, it said.
While Australia, Canada and New Zealand fared better than other wealthy nations last year, "some moderation in their growth is expected as well," it said.
The transitional economies of Eastern Europe will grow at a respectable 4 per cent this year while developing countries including many in Africa will expand by 4.25 per cent, it predicted.
But Latin America will remain weak after a year of economic decline in the region in 2002.