Economists predict good year for global economy in 1996
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This is a digitised version of an article from The Cayman Compass's print archive. Occasionally, the digitisation process introduces transcription errors, or other problems.
See the article in its original context from December 1995.
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Barring unforeseen events - shocks such as the Mexican financial crisis that rocked many emerging stock markets in 1995. In 1996 the global economy could grow by 4.1 percent, its fastest pace in eight years, according to the International Monetary Fund. This would outpace 1995's 3.7 percent growth and all previous years since a 4.6 percent advance in 1988, an IMF report declared.
"We are in a very encouraging phase of the economic cycle," Executive Director Michel Camdessus told a meeting of the 179-nation IMF in Washington.
World trade, which grew 9.5 percent in 1994, grew another 8 percent in 1995. It is expected to grow at a slightly slower but still healthy rate in 1996, the World Trade Organisation reported from Geneva.
World trade outstripped actual production in 1995, as it has for the past 20 years, a fruitful result of freer international interchange. "The global outlook is for moderate and steady growth in major developed countries through 1996," said the Conference Board, a New York-based international economic research organisation.
For the world's three great industrial powerhouses, Deutsche Morgan-Grenfell, an international banking and financial firm, predicted slightly more than 2 percent growth in the United States and the European Union next year, and 1.5 percent in Japan.
In fact, over the next five years U.S. annual economic growth will average 2.5 percent and inflation only 3 percent a year, according to 41 forecasters surveyed by the National Association of Business Economists.
In the 15-nation European Union, 3.1 percent economic growth had been officially predicted for 1995 but seemed unlikely to exceed 2.7 percent as the year drew to a close. The European Commission issued an official forecast of 2.6 percent growth in 1996 and 2.9 percent in 1997. Inflation in most membernations remained under control, averaging around 2 percent. In Japan, said the Conference Board, "recurring banking shocks and deepening deflation have lengthened the road to recovery."
The Japanese economy grew at a sluggish 0.6 percent annual rate in the third quarter of 1995, Japan's Economic Planning Agency said, and the economy should continue to improve slowly over the next year.
Elsewhere, "the peso shock in early 1995 continues to dampen economic prospects in Mexico," the Conference Board said.
But "robust expansions in other emerging industrial powers in Asia, Latin America and Europe have scarcely missed a beat. That is one reason why emerging markets are re"Economic performance among Latin American countries continues to vary considerably," said Union Bank of Switzerland, "and markets seem to reflect this. Mexico, Argentina and Venezuela are contracting, while Chile and Peru are still growing strongly at 6.5 and 8 percent respectively in 1995."
Meanwhile, notes the Swiss bank, "Asia continues to excel as the world's fastest growing region, with central eastern Europe (excluding Russia) and the Middle East consolidating their positive growth paths, showing the fruits of successful economic reform."
"In countries such as China, India, Pakistan and Israel the rapid pace of inflation is indicative of overheating economies," said Union Bank.
In India, a political backlash against the opening of the country to foreign investors culminated in the cancellation of a $2.8 billion power plant by Enron Corp. of the United States. "The immediate fallout," said Union Bank, "is that foreign lenders will be more cautious."
