Where Are We Headed In terms of World Economics and Finance

It is hard to say with the present state of Global uncertainties resulting from the Invasion of Iraq and other related developments. From an economic perspective, our only real guide into the future is present trends of our global economic indicators. We cannot factor into these statistics, the prospects of terrorist activities or any related or non-related subjective data. And so one must bear in mind that the forecast below does not take these matters into account. It should also be noted that the information was prepared some time ago but nevertheless remain relevant. With this in mind, let us continue.

The Emerging new Global Economy

By the year 2010 the world economy is expected to expand by almost 85%: from $26 trillion in 1994 to $48 trillion by 2010. Gross Domestic Product (GDP) of emerging economic nations as share of industrial economies is expected to rise from 58% in 1994 to 99% by 2010.

The main reason for this explosive inflation free growth forecast is a renewed spirit of continued openness; the catalyst for a triple world revolution of heightened political pragmatism, rapid technological advancement, and an interconnected Global Economy. At the same time, the thrust of economic forces fueling the Global Economy shift from North America to Asia, particularly China. In terms of growth in Gross Domestic Product, the rates in North America and Europe are expected to be even between 1994 and 2010: from $7.8 trillion to $11.7 trillion in North America; and from $6.8 trillion to $10.1 trillion in Europe. The growth in Japan is expected to hold steady at 44% during this period: from $2.54 trillion to $3.7 trillion. Growth in South America is expected to explode by 135% during this period: from a GDP of $1.7 trillion in 1994 to almost $4 trillion by 2010. The most explosive growth is expected in China: A massive 212.8% form $2.83 trillion in 1994 to an amazing $8.88 trillion by 2020! As for the rest o f Asia, growth in GDP is expected to reach 130%: from $3.32 trillion in 1994 to $7.63 trillion in 2010.

Without question, international trade remained the most important factor stimulating our Global Economy. Thanks to:

1. Increasing capital flow into developing countries.
2. Emerging political links and export markets.
3. Exploding communication links and export markets.

Hence, a boom in infrastructure development worldwide; and better capacity utilization, resulting from increasing investment in state of the art plant and equipment; leading to favorable GDP pictures and improving prospects for self supporting economic growth.

Aside form international trade; continued reduction in inflationary trends was major features of the international economic scene, in during the past few years. Inflation rate worldwide still average 4.3% but is expected to decline to 2.5% by 2010 as mentioned earlier. Differences in inflation rates between industrial nations and developing economies is therefore expected to reduce substantially. Similarly interest rate in the principal currencies is expected to show greater congruity with long-term interest rate stabilizing at around 8%.

The above forecast represents a remarkable opportunity to the savvy trader, but there are some drawbacks. World labor markets are expected to show little fundamental improvements.

Skill jobs gain from office automation, cybernetic, robotic, and other computerized industrial engineering techniques will be displaced by unskilled factory workers, shrinking middle management and other worldwide corporate downsizing initiatives. Consequently, more people will improve their job skills; hence skilled workers worldwide will be plentiful. Technologically driven improvement in productivity will also mean higher wages and income hence more consumption from the well-informed world class newly affluent.

Despite the fact that the international debt situation brightens somewhat in 2003, our international balance sheet is still a serious worldwide problem. We do not anticipate a financial collapse. But for some developing and emerging economies, industrial nations propensities to trade barrier reduction and debt restructuring are keys to prosperity. Of particular urgency are reducing large budget deficits on the one hand and the rebuilding of deteriorating infrastructures on the other hand.

Both activities require financing which are in most cases unaffordable; and yet such remedies are necessary steps for effective government; particularly in:

1. Reducing taxation
2. Controlling inflation
3. Achieving realistic interest and exchange rates
4. Promoting private business and industry and hence
5. Creating socio-economic and political environment conducive to investment and self sustained economic growth.

Donal S. Stewart
Http://Unitedtradeways.com