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World economy: Losing
confidence
PARIS - Geopolitical
instability provoked by international terrorism and the
Iraq crisis has provoked a sharp deterioration in the
world's economic climate, an international survey of
business opinion for the past quarter of 2002 shows.
The survey showed that the climate indicator
issued quarterly by the International Chamber of
Commerce and the Munich-based Ifo Economic Research
Institute at 86.8 - down from 101.1 in July and
significantly below its long term average of 93.9 from
1989 to 2001.
More than 1,000 executives,
business economists and economic analysts from 89
countries contributed to the survey.
Dr Genot
Nerb, Ifo's director of business surveys, commented,
"Business expectations for the next six months reflect a
general fall in confidence - down to 96.5, compared with
114 in July. Our respondents clearly don't expect a
strong upturn any time soon, but they do expect the
outlook to improve marginally." He added, "Turbulence in
world capital markets and the political uncertainty
caused by tensions over Iraq have had a powerful
negative impact."
Assessments of the current
economic situation - the other component of the economic
climate indicator - were also down, at 76.7 compared
with 87.7 in July.
A regional breakdown
indicates that the economic climate deteriorated
particularly in Western Europe, and to a less pronounced
extent in North America and Asia. The latest returns
show that growth in Europe in the next six months will
clearly lag behind the world average.
But
opinions on the longer-term outlook over the next three
to five years gave a brighter picture. Compared with
last year's October survey in the immediate aftermath of
the terrorist attacks on New York and Washington,
prospects for economic growth have slightly improved on
a world average (2.7 percent compared to 2.5 percent).
This was particularly true for Asia (3.5 percent
after 2.5 percent estimated in 2001), Australia and New
Zealand (3.5 percent after 3.3 percent) and North
America (2.7 percent after 2.4 percent). China, India
and Vietnam, with expected GDP growth rates above 5
percent, top growth rate expectations in the longer
term. Korea, Malaysia and Singapore expect growth rates
of around 4 percent.
The survey provided these
further trends:
Worldwide, short-term interest rates are expected to
fall in coming months. Long-term rates are likely to
stabilize at the current low level.
The US dollar is likely to weaken further against
currencies in Western Europe and in Australia and New
Zealand, but not elsewhere.
The major world currencies - the US dollar, euro,
yen and the UK pound - are now much closer to
equilibrium than in the previous two years.
Responding to a special question on corporate
governance, almost half the respondents (47.7 percent)
chose a combination of business self-regulation and new
government regulations aimed at greater accountability
as the best way to raise standards.
The second
most widely-supported approach (33.5 percent) was
reliance on the pressure of public opinion, the power of
the marketplace and effective enforcement of existing
rules. The least support (19.8 percent) was for the
option of tougher and more detailed new government
regulation rather than
self-regulation.
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