Terrorism
and Iraq crisis erode business confidence worldwide
 |
| *Arithmetic mean of assessment present and expected economic
situation. Source: ICC/Ifo World Economic Survey |
Paris,
3 December 2002 -
Geopolitical instability provoked by international terrorism and the Iraq crisis
provoked a sharp deterioration in the world economic climate, an international
survey of business opinion for the last quarter of 2002 showed today.
The survey showed the climate
indicator issued quarterly by the International Chamber of Commerce and the
Munich-based Ifo economic research institute at 86.8 - down from101.1 in July
and significantly below its long-term average of 93.9 from 1989 to 2001.
More than 1,000 executives,
business economists and economic analysts from 89 countries contributed to the
ICC/Ifo World Economic Survey.
Dr Genot Nerb, Ifo's Director
of Business Surveys, commented: "Business expectations for the next six
months reflect a general fall in confidence - down to 96.5, compared with 114
in July. Our respondents clearly don't expect a strong upturn any time soon
but they do expect the outlook to improve marginally."
He added: "Turbulence
in world capital markets and the political uncertainty caused by tensions over
Iraq have had a powerful negative impact."
Assessments of the current
economic situation - the other component of the ICC/ifo world economic climate
indicator - were also down, at 76.7 compared with 87.7 in July.
A regional breakdown indicates
that the economic climate deteriorated particularly in western Europe, and to
a less pronounced extent in North America and Asia. The latest returns show
that growth in Europe in the next six months will clearly lag behind the world
average.
But opinions on the longer-term
outlook over the next three to five years gave a brighter picture. Compared
with last year's October survey in the immediate aftermath of the terrorist
attacks on New York and Washington, prospects for economic growth have slightly
improved on a world average (2.7% compared to 2.5%).
This was particularly true
for Asia (3.5% after 2.5% estimated in 2001), Australia and New Zealand (3.5%
after 3.3%) and North America (2.7% after 2.4%). China, India and Vietnam, with
expected GDP growth rates above 5% top growth rate expectations in the longer
term. Korea, Malaysia and Singapore expect growth rates of around 4%.
The survey provided these
further trends:
- Worldwide, short-term
interest rates are expected to fall in coming months. Long-term rates are
likely to stabilize at the current low level.
- The US dollar is likely
to weaken further against currencies in western Europe and in Australia and
New Zealand, but not elsewhere.
- The major world currencies
- US dollar, euro, yen and the UK pound - are now much closer to equilibrium
than in the previous two years.
Responding to a special
question on corporate governance, almost half the respondents (47.7%) chose
a combination of business self-regulation and new government regulations aimed
at greater accountability as the best way to raise standards.
The second most widely-supported
approach (33.5%) was reliance on the pressure of public opinion, the power of
the marketplace and effective enforcement of existing rules. The least support
(19.8%) was for the third option offered: tougher and more detailed new government
regulation rather than self-regulation.
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