World Economic Growth to Rise to 4.7 Percent: ADB Report

The global gross domestic product (GDP) growth is forecast to rise to 4.7 percent in 2000, based on the stronger economic performance in the first half, according to a latest report of the Asian Development Bank released Monday.

The Asian Development Outlook (ADO) 2000 Update revises upwards the global growth forecast from the 3.5 percent projected by the Asian Development Outlook 2000 published in April.

The performance of the world economy in the first half of this year suggests a further strengthening of the global recovery that started in 1999, it said.

The principal factor underlying the much stronger global economic performance so far in 2000 has been the continuing growth momentum of the U.S. economy, it said.

While there are some signs of weakening consumer demand, GDP growth in the second came in higher than in the first, said the report.

However, events in the first six months have reconfirmed ADO's expectations that growth will be more evenly shared across the United States, Europe and Japan and that the Asian economic recovery will be sustained, it said.

There are clear signs of a strengthening of the cyclical upturn in Europe, and even in Japan the recovery may be taking hold with growth in 2000 expected to be about 1.5 percent, the report said.

Within Asia, all the crisis-affected countries are expected to achieve strong growth in 2000, while growth in China is now expected to be higher than earlier forecast, it added.

Even as growth has strengthened, it said, inflation rates in the advanced economies have remained subdued, edging up only modestly in response to higher energy prices.

To keep inflation from accelerating, the U.S. Federal Reserve raised short-term official interest rates six times over the last 12 months, and the European Central Bank also raised interest rates twice in the first half of this year. As a result European interest rates have also seen a net increase of one percentage point over the average rate in 1998, according to the report.

Meanwhile, the improved outlook for the Japanese economy and the steady shifting of growth momentum to more dynamic New Economy segments prompted the Japanese central bank to reverse its exceptional zero interest rate policy in August and raise rates by 25 basis points.

Globally, inflationary pressures are expected to increase somewhat in 2000 due to recovery-induced demand efforts and the strengthening of oil prices, the report said.

However, according to the report, the robust performance of the global economy disguises some concerns, such as the possibilities of a hard landing of the U.S. economy, the Japanese and European monetary authorities' tightening of their monetary stance, and a further rise in oil prices in the second half of the year.

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