International Economic Outlook

INTERNATIONAL ECONOMIC OUTLOOK By Evangelos Otto Simos THE UNITED STATES, CHINA, AND INDIA EMERGE AS POLES OF GLOBAL GROWTH I. GLOBAL ASSESSMENT AND OUTLOOK Despite adverse geopolitical factors, high oil prices that topped $75 a barrel, and rising interest rates, the world’s output is now estimated to have advanced by 5.2 percent in 2006, the fastest pace of growth in the last 33 years. A distinctive feature of the current global business cycle is the key role that the economies of three countries played in driving demand and shaping supply in the global economy. Of the industrial countries, the United States led the world in technological advancements that accelerated productivity while the U.S. consumer stayed on track at a five-year long buying spree. U.S. real GDP expanded in 2006 by 3.3 percent, contributing 13.5 percent to the world’s output growth in combination with the size of the economy. Of the developing countries, economic expansion in 2006 was predominantly robust in China and India, where real output is estimated to have increased by 10.5 percent and 8.7 percent, respectively, which is about twice the world’s average growth rate. Given the relative economic ...