International Economic Outlook

INTERNATIONAL ECONOMIC OUTLOOK By Evangelos Otto Simos, Ph.D. CURRENCY REALIGNMENT AND PRODUCTIVITY SUSTAIN GLOBAL GROWTH I. Global Assessment and Outlook Although global economic growth is expected to moderate from its 2004 peak, the pattern and the speed of the slowdown in output will differ appreciably among the major economic blocs. Higher oil prices, currency realignments and hightech driven productivity improvements have reshaped the global economic landscape leading to economic policies, particularly monetary policies, unparallel to past experiences. After easing at the end of 2004, oil prices headed gradually up again this year reaching above the 50 dollar mark per barrel in early March. This is the result of interplay between increasing demand - particularly from the U.S. and China – the realignment of currencies and the reaction of central banks to overall inflation instead of focusing on energy-pushed inflation like in the past. The weakness of the dollar has effects not only on trade and financial transactions but also on the oil markets. Oil is priced in U.S. dollars and a falling dollar means less oil revenue for oil producing countries which induces OPEC ...