U.N. experts - World economy 'on the mend'

UNITED NATIONS -- Declaring that the world economy is "on the mend," the United Nations on Thursday predicted global economic growth of 1.8 percent this year rising to about 3 percent next year -- providing there are no major shocks.

"After a pervasive global slowdown in 2001, with roughly a dozen economies falling into recession, a recovery is unfolding," according to the U.N. Global Economic Outlook, which is compiled from reports by 250 economic experts from 60 countries.

But the U.N. report said risks to the U.S.-led recovery abound: possible escalation of the Israeli-Palestinian conflict and the linked possibility of higher oil prices, a resurgence of war in Afghanistan or elsewhere, the increasing global dependence on the U.S. economy, and the potential for a financial debacle in Japan, the world's second-largest economy.

Even before the Sept. 11 terrorist attacks, a U.S. slowdown had helped drag down the world economy. But the economic shock waves from the attacks led the United Nations in October to revise its global forecast for 2001 down from 2.4 percent to 1.4 percent.

According to the new 17-page outlook, the global economy grew by just 1.2 percent in 2001.

"There isn't any doubt that the outbreak of terrorism set back the United States economy," said Nobel economics laureate Lawrence Klein, who heads the U.N. expert group that meets twice yearly.

"It brought us almost to a very serious recession. But the United States economy has a lot of resilience and it is on the mend at the moment, not by a huge amount, but nevertheless it's not falling at the present time," he told a news conference.

Since the beginning of 2002, a spate of statistics indicate that the upturn in the world economy arrived much earlier than most forecasters expected -- especially in the United States, the forecast said.

Signs of recovery

Data from other regions including Asia and Europe have all shown signs of recovery, it said, although developing countries aren't likely to benefit until the second half of this year.

"The world economy is on the mend," the U.N. forecast said.

It cited low interest rates in many countries, fiscal measures to stimulate economic growth, depleted inventories, resilient household spending, lower oil prices, and increased consumer and business confidence.

"These facts are critical for initiating the recovery, but they may not be enough to sustain it," it said.

A sustained recovery will depend on a resurgence in corporate profits leading to increased capital spending, an improved job market to support consumer spending, and a rebound in international trade, the forecast said.

The U.N. experts said there are many questions about the breadth of the recovery.