WORLD Experts: Economy is slowing
Growth projections are lowered as chances lessen for a strong economic rebound.
LOS ANGELES TIMES
The global economy is limping into the new year weighed down by the threat of war in Iraq and held back by tepid growth from Europe to Asia.
The lack of a strong driver in the coming year raises the risk that the world economy could lose its momentum or even slip into recession, the World Bank warned in its latest economic scorecard.
Nicholas Stern, the bank's chief economist, had held out hope for a stronger rebound, but recent events have prompted him and other analysts to lower growth projections for 2003.
"The recovery has been much more hesitant and uneven than we expected," Stern said.
Latest prediction
Although growth by region is expected to vary widely -- from 1.8 percent in Latin America to 6.1 percent in East Asia -- the World Bank is projecting that global gross domestic product will rise by 2.5 percent next year, up from 1.7 percent in 2002 but well below the 3.9 percent expansion in 2000.
The domestic front in the United States also is fraught with uncertainty. Heading the list of worries, business experts say, is the possibility that a military conflict in the Middle East could trigger a drastic rise in oil prices or a new wave of terrorist attacks.
If a war in Iraq dragged on, it could spook U.S. consumers whose spending has kept the nation's economy and its trading partners from sliding into recession.
"The biggest single vulnerability right now is oil and geopolitical issues," said Stuart Schweitzer, chief global investment strategist for J.P. Morgan Asset Management in New York.
"The other big issue concerns the U.S. consumer. ... It is legitimate to ask how long the consumer can keep going."
Such uneasiness was heightened after the retail sector reported that the just-ended holiday shopping season was the worst it had experienced in decades.
If the global economy can't count on the United States to propel growth, neither can American businesses rely on many others around the world.
Although the Bush administration is pushing hard to wrap up trade agreements with Chile and Singapore by early next year, overseas sales are unlikely to be a major source of strength for U.S. firms, because their biggest customers in Asia and Europe are struggling.
What could help
The only cause for cheer is a recent weakening of the dollar, which makes U.S. goods cheaper overseas. But since products are ordered months in advance, it takes time for currency shifts to have an effect on trade flows.
The first half of 2003 is likely to be particularly difficult for Japan. The world's second-largest economy is threatening to slide from slow growth to no growth.
At the same time, Germany, Europe's largest economy, is saddled with rising unemployment and widespread business discontent, according to analysts.