Economists see more gloom for global economy, according to latest ICC/Ifo survey
Economists said global economic growth has slowed further since the beginning of the year and they expected growth to continue slackening over the coming six months, according to the last ICC/Ifo World Economic Survey released today.
In the current survey, a large majority of economic experts in more than 80 countries said a successful conclusion to the Doha Round of multilateral trade negotiations would have a positive or even very positive and noticeable impact on the world economy.
The ICC/Ifo economic climate index dropped to 81.4 for the second quarter from 90.4 in the first quarter, reaching a six-year low. The quarterly poll taken in April surveyed 1,002 economic experts in 92 countries. This is the third time in a row the world climate index has fallen since August of last year.
“The cyclical contraction is strongly aggravated by the US sub-prime credit crisis, which has spilled over — especially into Europe, and some Asian countries,” said Hans-Werner Sinn, President of the Ifo Institute for Economic Research at the University of Munich.
As in the previous quarter, the strongest drop in the economic climate indicator was registered in the US, which recorded its lowest level since 1991, although economic prospects for the next six months have stabilized. The index also fell in two other large economic regions, Western Europe, where the index touched a six-year low, and Asia, which showed the mildest decline in sentiment, with the largest drops recorded in Japan and South Korea.
Economists surveyed said rising inflation was the most urgent problem facing the global economy, and predicted an average worldwide inflation rate of 4.2%, considerably higher than the 3.2% figure envisioned for 2007.
At the same time, experts polled pegged growth of the world economy this year at 3%, well under the prediction for growth made last year of 3.5%.
A large proportion of the experts surveyed foresaw a drop in interest rates during the next six months, but expected long-term interest rates to stabilize at current levels.
A larger majority of experts than in recent surveys viewed the US dollar as undervalued. On balance, economists broadly expect the dollar to continue to lose value against many other currencies over the next six months.
Doha could deliver a booster shot to world economy
A sizeable majority of economists surveyed agreed that when G8 leaders meet in Hokkaido Toyako, Japan on 8-9 July, one of their priorities should be to make considerable progress towards reaching a successful agreement in the Doha Round of trade negotiations in 2008.
At the same time, economists polled stressed the scope of the Doha Round for contributing to economic development and poverty alleviation through improved market access, especially in emerging markets.
Members of the World Trade Organization have been negotiating for six-and-a-half years on a multilateral trade deal aimed at reducing tariffs and subsidies.
“What the world needs now is greater political will at the highest levels to make the compromises required to reach agreement on the Doha trade round,” said ICC Secretary General Guy Sebban. “G8 leaders and the heads of emerging economies must take the necessary steps to get this deal done in 2008. A successful agreement would give much-needed confidence to the world economy during this time of uncertainty and faltering growth.”