Global economic growth continue to consolidate in 2006: UN report

The world economy will maintain a moderate growth rate of more than 3 percent in 2006 following a similar pace last year, according to an annual United Nations (UN) economic report released Thursday.

The growth, although a slow down from the historically high growth rate of 4 percent in 2004, enveloped a maturing of the recent global economic recovery, reported the UN's World Economic Situation and Prospects 2006.

Almost the same as the average of the past decade, this year's projected rate of growth in the world will be driven by main engine of the United States, along with the remarkable contribution from China, India and a few other large developing economies.

Economy recovery in most developed countries that experienced a growth slowdown in 2005 will not be expected in 2006. The reduced growth increase in the United States, lackluster performance in Europe and a modest return to expansion in Japan contrast with a slight fall-off in strong economic performance in developing countries, said the report.

The developing world is projected to grow more than 5.5 percent in 2006 compared with an estimated 5.7 percent growth in 2005 and 6.6 percent in 2004, due to a favorable international environment of low interest rates, low inflation and strong commodity demand.

The high growth last year was driven by the rise in world commodity prices, pushed up especially by the appetite of economies, such as China and India, for raw material, it said.

However, measures in China to cool off investment in steel and cement industries, consumer electronics and real estates are likely to bring down the country's growth down from 9.2 percent in 2005 to 8.3 percent in 2006, excluding service sector, said Shamika N. Sirimanne, chief of the socio-economic analysis section of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).

The report meanwhile voiced concern for several major downside risks that may take a toll on steady economic growth, including the disorderly adjustment of global imbalance, soaring oil prices, crush of house prices and outbreak of avian flu pandemic.

In 2005, the current-account deficit of the United States surpassed 800 billion US dollars, matched by increased surpluses elsewhere, especially in Europe, East Asia and oil-exporting countries.

If the deficit continues to pick up rapid pace, it could eventually erode the willingness of foreign investors to buy dollar-denominated assets, causing a precipitous fall in the value of the US dollar and an abrupt disorderly adjustment of the global imbalances, the report said.

"The major economics should coordinate their macro economic policies over the long run to mitigate the risk of a disorderly adjustment of global imbalance," it suggested.

As for risk of an avian influenza pandemic, the report said the possible macroeconomic costs of such a pandemic could be enormous since the world not be adequately prepared for an outbreak of pandemic proportions.

Source: Xinhua