After grinding to a halt in the final months of 2001, the global economic recovery is well underway, according to the Economist Intelligence Unit (EIU).
In its latest report on the prospects for the global economy, the EIU said it expects world growth to average 2.7 per cent in 2002. Though this is barely better than 2001 growth shouild accelerate in the latter half of the year and continue into 2003.
It said "2002 is going to feel a much better year than 2001 — most businesses will experience a dramatic improvement in operating conditions as the year unfolds."
In 2003 growth will average 4.1 per cent, with OECD economies expected to perform strongly, which in turn should help to boost performance in much of the emerging world, according to the EIU.
The US economy is recovering more rapidly than expected according to the EIU. Over the coming months growth will be driven by rising industrial production as firms restock and moderate consumer spending growth encouraged in part by tax cuts.
The EIU praised the aggressive policy action of the Fed which it said will have played a large part in delivering the recovery in late 2002 by cutting interest rates early in the downturn.
The euro zone is expected to grow marginally in the first quarter of 2002 and accelerate in the second half and into 2003, although the speed of the pick-up will lag that of the US, not least because policy action has been less aggressive.
But the EIU is less optimistic about the prospects for Japan. "The Japanese economy is suffering from many serious problems, and its long-term prospects remain dismal" it said.
It added that the world’s second largest economy will be held back by deflation, the weakness of the banking sector, and structural rigidities in many industries.
Emerging markets should also benefit from the pick up in growth. Asia will see stronger export growth from now onwards and much of Latin America is benefiting from strengthening commodity prices and greater liquidity on international capital markets though Argentina remains a concern.
Improved growth in the EU is starting to help Eastern Europe. Sub-Saharan Africa will benefit from higher commodity prices, and some countries will also rebound from war - or drought-driven recessions, the report said.
But the Middle East will be held back by low oil prices, reduced income from tourism and continued nervousness by foreign investors, driven by concerns about regional security.