UN Predicts Slowdown of World Economy

A new report by the United Nations (UN) has predicted a deceleration of the world economy this year after three years of growth mainly due to the weakening of the American economy which is being dragged down by softening housing market.

The report also maintains that no other developed economy is expected to emerge as an alternative engine for the world economy with growth rate in Europe for recast to slow down to 2 per cent and in Japan below 2 per cent.

So far, the report said, there has been only limited pass through of higher energy prices into core inflation and inflationary pressures are expected to moderate this year in view of retreat of oil prices in the second half of the last year, the expected slowdown in the global economic growth and tighter monetary policy stance in many economies.

The exceptions, it adds, are a few countries in Africa which have experienced sharp increase in inflation owing to food shortages, currency depreciation and stronger pass through of higher oil prices to consumers and producers.

The US, it said, is running a current account deficit around $900 billion matched by surpluses generated by Germany, Japan and, more importantly, by developing regions and economies in transition including major oil exporters.