Posted: Wednesday, January 30, 2008, 3:21PM
Research anticipates economic slowdown
The world faces an uncertain future as the year begins amid warnings that the global economy is set to slow down and that business growth remains subdued. But the World Bank predicted that the rise of the Chinese economy will soften the impact of the credit crunch in the West in the year ahead.It also admitted it had overestimated the size of China’s economy last year and revised its forecast that it would be the biggest in the world by 2012. But it said annual economic growth across the world would slow to 3.3 per cent in 12 months, compared with 3.6 per cent in the past year.
Other research showed that global expansion was at its lowest for some time with the smallest rate of increase in December since May 2003.
UK-based NTC Economics said expansion of the world economy was at its lowest for 55 months in December as growth of new business remained subdued. This
reflected a worsening of conditions in the US where output contracted for the second time in three months and at the fastest rate since early 2003.
The World Bank said economic growth in China could be as high as 10 per cent over the next two years, with India also expected to show near-double digit growth.
It expects the economic slowdown to be felt most severely in the US, which it predicted may see a growth rate of just 1 per cent in the first half of this year.
A worse than expected slump in US economic activity could have a knock-on effect, the bank warned. “A sharper US slowdown is a real risk that could weaken medium-term prospects in developing countries,” the World Bank’s Uri Dadush said.
A report by the bank also claims that erroneous calculations had overstated the size of China’s economy by as much as 40 per cent. The figures are calculated using a
system of purchasing power parity which takes account of differences in prices for the same goods that are traditionally lower in China than in Western countries.
According to the report, average incomes in China are 10 per cent of those seen in the US. The average Chinese person earns $4,091, compared to the average of $41,000 in the US.
NTC Economics said the rate of expansion in manufacturing production held broadly steady in the Eurozone at the end of 2007, although the rate of EU productivity growth was the slowest in six years.
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