Outlook Abroad Gloomy Now, Brighter in 2002

Expectations for global economic growth, which were reasonably sanguine at year-end 2000, have grown less optimistic this year as the severity of the U.S. economic slowdown/downturn has become more apparent. Slowing consumer spending growth and an absolute downturn in business investment in the United States is bound to have a significant negative impact on the economic fortunes of our major trading partners, including Canada, Mexico, Japan, and many nations in Western Europe and in the Asia/Pacific region.

Economists at the International Monetary Fund (IMF) expect to see worldwide growth in inflation-adjusted Gross Domestic Product (GDP) slow from 4.8% in 2000 to 3.2% during 2001. In December, the IMF forecast that global GDP growth during 2001 would slow only modestly, to 4.2%. The IMF now anticipates that the U.S. economy will grow by just 1.5% this year, and that Japan will eke out a GDP gain of only 0.6%. European economic growth is expected to reach 2.4% during 2001, down more than a full percentage point from 2000.

Growth throughout most of the world is expected to accelerate in 2002 to a level even higher than that recorded during the final two years of the past decade. But that still leaves us with a disappointingly lackluster pace of global economic activity for the balance of this year. However, world economic output should still expand at a reasonably healthy rate throughout the first half of this new decade.