DEVELOPING COUNTRIES LEAD CONTINUING EXPANSION OF WORLD ECONOMY

Press Release
DEV/2140

DEVELOPING COUNTRIES LEAD CONTINUING EXPANSION OF WORLD ECONOMY

NEW YORK, 24 March (DESIPA) -- World economic growth is expected to pick up modestly this year and continue to strengthen over the next few years, according to forecasts discussed at a meeting of the Ad Hoc Expert Group on the Short- and Medium-term Prospects of the World Economy (Project LINK) that began this morning at United Nations Headquarters.

Project LINK, which prepared the main set of forecasts being reviewed, is an international economic research network of more than 70 economists from all over the world led by Nobel Laureate Lawrence R. Klein of the University of Pennsylvania. Representatives of the World Bank, the International Monetary Fund (IMF) and the National Institute for Economic and Social Research of the United Kingdom also pointed to an upturn in world growth over the short-term.

The continuing expansion of the world economy is led by the developing countries, where aggregate output is seen as increasing by 6 per cent in 1997 and at a slightly faster pace in 1998. All main developing country areas are forecast to share in this expansion, with a particularly rapid rate of increase in Asia. While the forecasts indicate a higher rate of growth for Africa than were recorded earlier in the decade, it remains well below the average for all developing countries taken together.

An acceleration in growth is also expected in the more industrialized group of developed market economies, although the average rate of expansion in these countries is likely to remain slower than in the 1980s. A strengthening recovery in the depressed levels of economic activity is projected for the economies in transition of Eastern Europe as reforms and stabilization programmes yield results. Reflecting sharp contrasts in the region, output in the Russian Federation and the Ukraine -- which has fallen each year during this decade -- is forecast to continue declining in 1997, but at a much reduced rate, and then begin the process of recovery in 1998.

- 2 - Press Release DEV/2140 25 March 1997

This positive outlook for world economic growth is also reflected in the sustained buoyancy of world trade. While world trade slowed down in 1996 following two years of extremely high growth, world trade volumes are now expected to rise rapidly during 1997 with the recovery of continental Europe. Trade liberalization due to the Uruguay Round of multilateral trade negotiations and regional integration efforts should also contribute to ensuring that trade continues to increase at a rate about twice as fast as world output. It was noted, however, that the benefits of a supportive international economy are not automatic and require active policies on the part of governments.

In their review of the global economic outlook, participants emphasized that, despite faster growth, unemployment is likely to remain a major problem in Europe and developing countries. Only a modest decline in the unemployment rate is foreseen in Europe and it was noted that unemployment in many developing countries -- particularly those in North Africa and Western Asia -- remains extremely high and a potential for social disruption.

In addition to their review of the global economic outlook, the participants also heard lectures on "The Pros and Cons of the European Monetary Union" and "Global Aging, Saving and Investment", as well as a panel discussion on "World Commodity Markets".

A review of the outlook for economic growth and international trade in different world regions will be the focus of meetings on Tuesday and Wednesday. Lectures on the world trading system and sessions on problems of economic modelling are also scheduled for the rest of the week.

A review of the outlook for economic growth and international trade in different world regions will be the focus of meetings on Tuesday and Wednesday. Lectures on the world trading system and sessions on problems of economic modelling are also scheduled for the rest of the week.

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