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Economic recovery
hopes hinge on an end to Iraq crisis
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Arithmetic mean
of judgement about present and expected economic situation.
Source: ICC/Ifo World Economic Survey |
Paris,
6 March 2003
- Business expectations for the state of the world economy by the end
of July show a marked improvement, an international poll covering 90 countries
disclosed today.
But exceptionally
low assessments of the current economic situation have not changed since
October 2002, according to the quarterly poll by the International Chamber
of Commerce and the Munich-based Ifo economic research institute, carried
out last January.
Dr Gernot Nerb, Ifo's
Director of Business Surveys, said: "The improvement of the forward
indicator from 96.5 to 101.8 can be explained by widespread expectations
that the Iraq crisis will have been resolved one way or another six months
from now.
"Similarly, uncertainties
about the course of events in Iraq have depressed business views of the
world economic situation at the present time, leaving the current indicator
unchanged for two successive quarters at 69.4," Dr Nerb said. The
same indicator stood at 78.5 at the end of September.
More than 1,100 executives,
business economists and economic analysts from every continent contributed
to the ICC/Ifo World Economic Survey.
The overall ICC/Ifo
business climate indicator, made up of assessments of the current state
of the economy and expectations six months in the future, was up slightly,
reaching 85.9 compared with 83.2 in the survey published in December 2002.
This was still well
below the long-term average since 1989 of 93.7 and was entirely due to
the improvement in forward expectations.
Ifo's analysts
warned
against interpreting the small improvement in the world economic climate
as a clear sign that worldwide recovery has started. They said the poll
could be showing no more than an interruption of the downward trend.
"The next survey
in April will be of crucial importance. It will most likely take place
in a situation of diminished geopolitical uncertainty, with fundamental
economic trends becoming clearer."
The poll showed that 45% of respondents view global deflation as a threat,
including 5% who viewed it as a "strong" possibility. Fears
of worldwide deflation were greatest in Asia (68%) and the Middle East
(67%). The Ifo questionnaire defined deflation as "sustained price
decreases over an entire economy".
A regional breakdown
showed that the economic climate stabilized at its low level particularly
in Western Europe and marginally improved in North America and Asia. Growth
in Europe over the next six months will continue to lag behind the world
average, in the view of the business experts.
The survey provided
these further highlights:
- The downward trend
of short-term and long-term interest rates is expected to level off.
- World currencies
are close to equilibrium. The British pound sterling is still judged
to be overvalued. For the first time in its history, the euro is seen
as slightly overvalued.
- Consumer price
inflation is expected to stand at 3.2% in 2003 - the same estimate as
for last year.
For further information
contact Bryce Corbett ICC Director of Communications tel: Paris +33 1
49 53 29 87; Email: Click here to send a mailor Dr Gernot Nerb Ifo Institute: tel: +49 (0) 89 92 24 12 19,
Fax: + 49 (0) 89 92 24 14 63, email: Click here to send a mail
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