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1.1 Global Economic Performance: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: World growth is moderate and likely to slow down in 2007

1.1 Global Economic Performance: Economic Report on Africa 2007

In 2006, world economic growth improved slightly to 3.8 per cent from 3.5 per
cent in 2005 (figures 1.1 and 1.2). Globally, growth rates were highest in South-east
Europe and Commonwealth of Independent States (CIS) countries as well as in East
and South Asia. Growth in the least developed countries remained above 6 per cent
since 2001 (United Nations 2007 and UNCTAD 2006a). High prices for oil and other inputs and a tendency towards more restrictive monetary policies in industrial
countries combined with some turbulence in financial markets are likely to contribute
to a slowdown in 2007 (UNCTAD 2006a; UN-DESA 2006).

Growth in the USA slowed slightly during the second half of 2006 and might slacken
further in 2007 but is not likely to go into recession. The decline in house prices
is expected to weaken consumer spending as well as import demand (UN-DESA
2006; United Nations 2007). Rising oil prices and increasing imbalances also constitute
important downside risks for growth.

The Euro area grew by a modest 2.5 per cent in 2006, though it was the highest
growth rate since 2000. This was driven by higher domestic demand, particularly
investment expenditure, as well as strong export performance. In 2007, it is expected
that external demand will decline, and that stronger currencies will hamper exporters.
Monetary and fiscal policies are also expected to tighten, which will reduce
growth. Growth in Japan is attributable to buoyant domestic demand and employment
growth, but it is expected to slow down in 2007 (UN-DESA 2006; United
Nations 2007).

China and India are engines of trade in developing Asia

Growth in developing Asia was high in 2006, driven by China (10.2 per cent) and
India (7.7 per cent), which are the engines of trade in manufacturing within the
region. In addition, domestic demand has also recovered in most Asian countries.
Growth in the region is expected to decline to a more sustainable yet still strong
pace due to a slowdown in external demand for Asian products. Additional downside
risks include protectionist trade policies in major export destination countries,
further increase in the level and volatility of oil prices, the avian influenza, as well
as political and geopolitical uncertainties, especially in the Islamic Republic of Iran,
Nepal and Sri Lanka (United Nations 2007; UN-DESA 2006; UNCTAD 2006a).

China is not only experiencing rapid growth but also rapid structural change driven
by FDI and a rise in competitiveness. Despite strong growth in manufacturing wages
(between 12 and 16 per cent in recent years), unit labour costs in manufacturing
are falling due to growth of labour productivity by around 20 per cent per annum
(UNCTAD 2006a).

Growth in Latin America has remained above 4 per cent for the past three years due
to strong external and domestic demand. At the same time, growth in the region
has become more broad-based. However, the external sector remains vulnerable and
the region might suffer from higher interest rates in global capital markets as many
countries have relatively high debts, which will slow down growth in 2007 and in
subsequent years (UN-DESA 2006; United Nations 2007).

Related Articles
  1.8 References: Economic Report on Africa 2007
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  V. D. The Future of China-Africa Economic Relations: FACTORS INFLUENCING THE GROWING TIES
  References: What Drives China’s Growing Role in Africa?
  CONCLUSION: What Drives China’s Growing Role in Africa?

Article Tags: Commonwealth of Independent States CIS, DESA, DESA, domestic demand, external demand, growth rate, growth rates, oil prices, South Asia Growth, UN DESA, UN DESA, UNCTAD, UNCTAD, United Nations



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