The recent cool down of the world economy is expected to pick-up over the next six months, according to the results of the latest ICC/Ifo World Economic Survey (WES).
Assessments of the current economic situation by 1051 experts in 95 countries dropped to their lowest since a poll conducted in February 2004, but were offset by the favourable expectations for the next six months.
“This confirms the impression that the slowdown on world economic growth since mid-2004 is a temporary disturbance and not the beginning of a decline in world economic activity,” said Hans-Werner Sinn, President of the Ifo Institute for Economic Research. “In the course of the second half of 2005, a further revival of the world economy is expected, according to the WES results.”
The quarterly poll by the International Chamber of Commerce and the Munich-based Ifo Economic Research Institute saw its world economic climate indicator stabilize at the level of the last survey in April, after having previously fallen five times in succession. At 97.5 it still remained above its long-term average of 94 from 1990-2004.
A regional breakdown shows that improvement in the world economic indicator was especially marked in North America where the assessments of the current economic situation and the expectations for the next six months both pointed upwards.
The climate indicator in Asia remained unchanged since the April survey. Much more confident expectations were offset by a more cautious appraisal of the current economic situation.
Only in Western Europe did the climate indicator continue to decline. The clearly worsened appraisals of the current situation were not compensated by the more favourable expectations. Within Western Europe the climate indicator remained unchanged in the euro area, but it worsened in Sweden, Switzerland and most strongly in the United Kingdom.
- In spite of the sudden hike in oil prices, WES experts did not expect inflation to increase. They predicted a 2.9% increase in consumer prices for 2005, the same inflation rate as in 2004.
- The trend of rising interest rates is expected to level off. The WES experts predicted an increase in central-bank interest rates in the USA and some Asian countries, stable short-term rates in the Euro area, and a continuing fall in the United Kingdom official interest rates.
- After the recent rise in the value of the US dollar, it is no longer regarded as clearly undervalued. Accordingly, the Euro was seen as overvalued far less frequently than in previous surveys. The Japanese yen is at a fair value, but the British pound continues to be overvalued.
In anticipation of the upcoming UN Summit World Summit on the Information Society taking place in Tunis later this year, a special section of the survey asked the polled experts about the importance of the Internet for professional and private use in their countries at present.
A staggering 95% of respondents considered it important or very important for professional use and 87% found it important or very important for personal use.
The survey asked the experts to assess the degree of digital divide — the socio-economic gap between people who have and people who do not have access to the Internet — in their country. While the degree of digital divide appeared to differ across regions, 60% of respondents regarded the divide as very high or high in their countries.
The vast majority of economists polled (92%) said that they thought the Internet should function as it currently, does with a coalition of stakeholders from civil society, business and governments involved and 64% said they would not want to see a shift in who has responsibility for how the Internet is run from this coalition of stakeholders to governments.
ICC is the world business organization, the only representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world. ICC promotes an open international trade and investment system and the market economy. Business leaders and experts drawn from the ICC membership establish the business stance on broad issues of trade and investment, e-business, IT and telecoms policy, as well as on vital technical and sectoral subjects. ICC was founded in 1919 and today it groups thousands of member companies and associations from over 130 countries.
Since 1981 the Ifo Institute has conducted a quarterly survey in numerous countries on business cycle developments and other economic factors in the experts’ home countries. The July 2005 survey received responses from 1051 experts in 95 countries. The survey is conducted in co-operation with the International Chamber of Commerce in Paris (ICC) and with financial support from the European Commission.
A detailed regional analysis appears in the quarterly journal, CESifo World Economic Survey. This report contains advance information on the most important results.