The rapid growth of the world economy has continued this year and healthy momentum is causing economists to forecast an overall growth of 5.1 percent for the year.

There are two main reasons for the rapid growth of the world economy: firstly, the unexpected renascence of the Japanese economy after the nation finally hurdled long-term economic recession. In the other Asian countries, the growth rate was high. The second reason was the economic of members of the European Union.

According to official statistics, the US's current account deficit in the second quarter of this year rose to US$218.4 billion and the year end deficit is estimated at US$874 billion dollars. The deficit is equal to 6.6 percent of the country's GDP and the net debt to GDP ratio will surpass 25 percent.

The US dollar did not, as was feared, collapse in the face of a huge current account deficit, thanks to support from countries and regions that have a current account surplus with the US.

The US Federal Reserve decided not to increase the national interest rate of 5.25 percent in December. It also observed the cooling of the US housing market and predicted that the US economy would grow at a moderate speed during the next few quarters.

However, the US economy began to sink in the second quarter of this year and economic growth in the third quarter slowed to just 2.2 percent. The US dollar will continue to fall in 2007 if the Federal Reserve stops raising interest rates.

Japan's economic recovery was the highlight of 2005. In 2006, economic growth slowed a little, falling from 3.3 percent to 1 percent then going back up to 2 percent at the end of each of the first three quarters.

Japan's economic growth was fuelled largely by domestic demand, a good sign as Japan's economy has long relied on net exports and government investment. Japan's consumption index will surge to 2.7 percent this year.

Europe's economy is also growing, with Germany and France the major forces behind this. The growth rate in Euro-denominated nations during the first three quarters was 3.1 percent, 3.8 percent and 2.1 percent respectively. The growth rate for the year is expected to be 2.5 percent.

Big, developing economies are always the most robust component of the world economy. Global financial turbulence in the first half of 2006 threatened some developing nations, but fortunately there were no financial crises. Growth in China and other major developing nations will continue to be rapid.

The outlook for the world economy remains positive. However, we must be cautious about the downturn of the US economy and the dollar depreciation as this would have an adverse impact on the Chinese economy.

The author, Yu Yongding, is the director of the Institute of World Economies Politics, at the Chinese Academy of Social Sciences. Translated by People's Daily Online.