World economy will flag in next six months

“The expectations for the coming six months have again weakened to some extent, but the appraisals of the current situation have once more improved,” said Hans-Werner Sinn, President of the Ifo Institute for Economic Research. “These results are characteristic for the late phase of a cyclical upswing.”

At 103.8, the WES indicator for the world economic climate is lower than in the July survey but still clearly above its long-term average of 93 (1990-2003). The only moderate weakening in economic expectations and the further improvement in the assessments of the current situation still point to a positive development of the world economy in the first half of 2005 despite a weakened dynamic, experts at the Ifo Institute said.

A regional breakdown shows that the climate indicator fell most clearly in North America, reflecting both a weakening in the appraisals of the current situation as well as the expectations for the economy in the US. The decline in the climate indicator in Asia is solely due to less optimistic expectations for the coming six months, whereas the appraisal of the current situation has improved over the July survey. In Western Europe as well, the slight decline in the climate indicator is only attributable to the less optimistic expectations, whereas the current economic situation was again assessed positively by the surveyed experts.

• World Economic Climate approaching a cooling-down phase
• Current economic situation remains above satisfactory, economic expectations have weakened somewhat
• Inflation outlook remains benign
• Fewer WES experts expect rising interest rates
• Euro still overvalued
• Growth will not lead to more employment in the majority of countries, according to WES experts

World economy: Soft-landing is likely
Western Europe: Satisfactory economic performance
North America: US economy cools down
Eastern Europe: Expanding markets
CIS: Economic climate remains favourable
Asia: Towards an economic soft-landing
Oceania: Boom continues
Latin America: Economic rebound
Near East: Economic climate still highly favourable
Africa: South Africa remains on a sound stabilization course

The survey is conducted in co-operation with the International Chamber of Commerce (ICC) in Paris and receives financial support from the European Commission.