International Economic Outlook

INTERNATIONAL ECONOMIC OUTLOOK By Evangelos Otto Simos EXPORT-LED GLOBAL GROWTH FROM RECYCLING OF OIL REVENUES I. GLOBAL ASSESSMENT AND OUTLOOK Annual statistics on national accounts for last year have been fi nalized around the globe. They show that the world economy expanded by an impressive an nual growth rate of 5.4% in 2006, the fastest pace since 1973. We fore cast this remarkable global growth performance to continue in 2007 and 2008, led by continued strong economic growth in the emerging economies of China and India. In the last three years, the combined contribution of China and India to worldwide economic growth averaged 42%, twice their contribution recorded in 1990. Their combined market size, measured in Purchasing Power Parity (PPP) dollars, hit 14.5 trillion in 2006, compared with 2.8 trillion in 1990. Our global forecast calls for continuation of this record-breaking economic growth in both China and India (see Figure 1). Despite a temporary U.S. slowdown driven by a correction in the housing market, recent evidence from quarterly national accounts and forward-looking economic data suggests that economic growth continues to be strong in the other industrial ...