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Economist Intelligence Unit Forecast Anticipates Improvements in the World Economy

New York, Jan 07, 2003

The latest forecast from the Economist Intelligence Unit, a specialist publisher serving companies establishing and managing operations across national borders, predicts a gradual improvement of the global economy, with average world GDP growth moving from 2.7% in 2002 to 3.9% in 2004. The recovery will be contingent upon many factors, including renewed consumer confidence, increased domestic demand, the gradual correction of imbalances in the U.S. economy and short-lived U.S. military action against Iraq.

The January 2003 “Global Forecast”, prepared by EIU Chief Economist Robert Bew, states that in the U.S., lagging consumer confidence resulting from corporate misdeeds and low equity prices will continue to affect the economy by decreasing private consumption and increasing private savings. In addition, an excess of production capacity will mute corporate investment until consumption catches up. Key to improving the economic future will be the recovery of consumer as well as investor confidence. Said American National Standards Institute chairman, Dr. George Arnold, “The standards community must work together to address this urgent national priority through standards that increase accountability and improve trust in business.”

Citing the importance of demand for exports and domestic demand in improving the economies of several emerging markets, Arnold highlighted another area where standards could play a beneficial role. “One of our ANSI’s key priorities is to provide American leadership in the creation of globally-relevant standards and conformance assessment systems that promote economic prosperity and trade. By providing universality, international standards support the world-wide sale of products.”

Perhaps the most significant variable in the EIU report is U.S. military action in the Middle East. EIU states, “The entire global outlook is being affected by concerns about the possibility of a U.S.-led war against Iraq.” Already uncertainty has increased oil prices, which has been detrimental to production in many OECD countries. The EIU report predicts that OPEC will increase production to make up for Iraqi oil going off stream, with the result being a temporary spike in prices and restabilization when it is clear that the oil supply will remain sufficient.

The report cautions, however, that there are a number of risks to this forecast. The EIU gives a 20% probability that more serious repercussions could occur. “One possibility is that oil producers in the Middle East will refuse to increase production to make up for the Iraqi shortfall, or will even withhold production themselves.” The high oil prices that would result—possibly $80 per barrel or higher—would be very taxing on production and reduce growth in both developed and emerging economies.

For further information about the Economist Intelligence Unit or to request a copy of the latest report, contact Jeremy Eagle, Director of Marketing Development at More information can also be found at the EIU website.

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