For the fifth consecutive year, global economic growth will exceed 4 percent and will be in the neighborhood of 5 percent for the fourth consecutive year—the strongest sustained global economic advance since the boom of the 1960s.
The slowdown in the United States since early 2006, recent indications of slowing in Europe and Japan, concern that stronger efforts will be needed to contain inflation in China, and turbulence in world financial markets arising originally from concerns about US subprime mortgages raise uncertainty about growth for 2008.
A substantial global slowdown, led by a possible recession in the United States and trouble in the Chinese economy, is clearly a risk. The more likely outcome for 2008, however, is moderately slower global growth, in the neighborhood of 4 percent. Beyond 2008, global growth is likely to remain in the 4 percent range, with the industrial countries advancing sedately at a little better than 2 percent, and the developing countries, led by China and India, charging forward at a pace somewhat better than 6 percent.
Surging world commodity prices, especially for energy, reflect the rapid recent pace of global economic growth and the particularly rapid growth in emerging-market countries that are heavy users of energy and other primary inputs. So far, rising commodity prices have not been reflected in much increase in consumer price inflation, especially core inflation that excludes food and energy prices.
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