A. Developments in the Global Economy in 2000
2.0 Mr Speaker, the growth in the global economy, which was observed
in 1999, strengthened in 2000. Global output expanding by 4.7 percent.
This was the highest growth rate since 1984 and was better than the 3.3
percent in 1999. This impressive performance was as a result of the continued
strength of the United States’ economy; the robust upswing in Europe; the
consolidation of the recovery in Asia; and a rebound from last year’s slowdowns
in emerging markets in Latin America, the Middle East and Eastern Europe.
However, output performance in Africa was mixed. While export prices for
minerals (including oil) were responsible for the economic expansion in
some African countries, growth in others was severely curtailed by natural
disasters and adverse movements in commodity prices.
2.1 Growth in the advanced economies improved to 4.2 percent, from
3.2 percent in 1999. The major industrial countries accounted for nearly
all of this increase. In terms of Guyana’s important trading partners,
the United States’ economy continued to display remarkable resilience,
growing by some 5.2 percent, while in Canada, the economy continued to
rebound strongly to 4.7 percent, after a temporary slowdown in the wake
of the Asian financial crisis. In Europe, in spite of a weakened euro,
the currency of choice for most members of the European Union, the combined
output of countries in the euro area expanded by 3.2 percent.
2.2 Mr Speaker, the continued expansion in the advanced economies
was responsible for the fall in unemployment to 5.9 percent in 2000. At
the same time, however, these countries have had to contend with rising
inflation rates, in face of higher energy prices. Oil prices were significantly
higher than expected, due to both supply constraints in producing countries
and the continued strength of global demand. As a consequence, consumer
prices rose by 2.3 percent, higher than the 1.4 percent in 1999. Similar
growth trends were observed for the developing countries, where, as a group,
output increased by 5.7 percent, up from 3.8 percent in 1999. However,
inflation slowed to 6.2 percent, an improvement from the 6.6 percent recorded
2.3 World trade in goods and services almost doubled from 5.1 percent
in 1999 to 10 percent in 2000. However, this phenomenal growth did not
have a uniform impact on the current account position of many countries.
For example, while the expected improvement was reflected in the oil exporting
countries, there was deterioration in the current account balances of countries
such as the United States and the United Kingdom. Although a general upward
trend was discerned, movements in non-oil commodity prices were mixed.
Prices of metals and minerals rose by about 25 percent, while an overall
pattern was less evident for the prices of agricultural commodities.
2.4 Mr Speaker, at the Regional level, the economic expansion at
the world level continued to have a positive effect on performance in most
of the Caricom countries. Growth in output ranged from 7.9 percent in Trinidad
and Tobago to a small increase in Jamaica. Although there were slowdowns
in visitor arrivals and declines in banana production, Barbados and most
of the OECS countries were able to return creditable growth performances,
as the construction and manufacturing sectors took up the slack.
B. Outlook for the Global Economy in 2001
2.5 Mr Speaker, there are signs that global growth will be slower
than projected in September last year. Recent forecasts have scaled down
the projection from 4.2 percent to 3.2 percent, with a more robust projection
of 3.9 percent in 2002. The cause of this less optimistic outlook is the
rapid slowdown of the United States economy - where growth is now being
projected at 1.5 percent - and the moderation of growth in Europe and Japan.
Growth in the euro area is expected to be 2.4 percent, climbing to 2.8
percent in 2002. The prediction of the International Monetary Fund (IMF)
is for a substantial and more broadly distributed slowdown in global economic
growth than forecast previously.
2.6 Mr Speaker, while the overall outlook is encouraging, there
are still significant risks and uncertainties. While economic fundamentals
have improved in all major geographical areas, a number of countries -
particularly in Latin America and the Caribbean - continue to have financing
difficulties. The on-going tightening of global financial conditions could
accentuate the problems of accessing cheap credit. This would impose an
inordinate burden on these countries to reduce their exposure to external
shocks, even as they seek to take advantage of the world economic expansion.
2.7 Another burning issue, Mr Speaker, is the persistence of poverty
in the midst of plenty. A sustained reduction in poverty will require stronger
growth that benefits the poor. While the affected countries must continue
to work towards improving their macroeconomic conditions, the international
community must be prepared to support their efforts. For a start, they
could do so by fully funding the Highly Indebted Poor Countries (HIPCs)
initiative, so as to allow debt relief to be delivered to the poorest countries
in a way that achieves poverty reduction. Also, they should reform trade
policies that discriminate against poor countries (especially agricultural
trade); provide resources for mitigating the harmful effects of globalisation;
and reverse the decline in official development aid.