PARIS, 1 December 2004 — China, Japan and North America will pull the global economy forward over the next two years despite headwinds thrown up by high oil prices and tenacious deficits, the OECD said yesterday.
The OECD forecast economic growth of 2.9 percent in 2005 for its 30 member countries, not including China, down from 3.6 percent this year. But it warned that in Japan momentum was likely to be halved next year, when the economy is projected to expand slightly more than two percent after four percent in 2004. In general, according to the OECD, threats to what should be continuing, gradual economic expansion were posed by volatile oil prices, a surge in the euro against the dollar and fiscal and trade imbalances.
Overall growth in the Organization for Economic Cooperation and Development should pick up to 3.1 percent in 2006, the OECD said in its twice-yearly economic outlook. It predicted that an ongoing economic recovery “will benefit from continued Asian dynamism”.
The study pointed in particular to China, which is not an OECD member but “where activity accelerated in the third quarter, following a desirable slowdown during the first half of the year.”
Chinese growth was forecast to slow to eight percent in 2005 from 9.1 percent this year, reflecting higher oil prices and government tightening measures, before rebounding to 8.5 percent in 2006. But at the same time, the impact of the government’s policies and costlier oil on economic growth were expected to be offset by increasing investment in the power generation sector, strong demand for real estate, rising rural incomes and buoyant demand for Chinese exports.
Despite an expected slowdown in Japan, the country’s “economic expansion remains on track”, according to the OECD, which cited weaker export growth as a constraint on activity. The report said “positive developments” could be expected in North America, where the US economy should show growth of 3.6 percent this year, 2.9 percent in 2005 and 3.1 percent in 2006. The OECD forecast came as the Bush administration announced that the economy expanded at a 3.9 percent annual pace in the third quarter, stronger than had been previously estimated.
