Deloitte Research – Global Economic Outlook1
The world economy is performing reasonably well. Growth in the US, China, Russia, and India isstrong. Inflation in most major countries remains low by historical standards and long-term interest ratesare unusually and surprisingly low. Even long-suffering Japan has seen relatively good performance lately,the result of strong demand from neighboring China. And although some of the biggest countries of theEuropean continent are stagnating, others are doing quite nicely. Finally, although the price of oil hasrisen substantially, oil consuming nations seem to have absorbed this shock reasonably well. Meanwhile,oil exporting nations are seeing their first major windfall in a generation.
Global Economic Outlook 2006
Global risks, regional opportunities
Table 1. GDP Growth in Selected EconomiesUSEurozoneJapanUK
2005 Est 3.5 1.2 2.0 1.9
Yet a variety of risks cast a darkening shadow across theglobal economic landscape. Among these risks are the effectsof the increase in the price of oil as well as instability in someoil-exporting countries, protectionist sentiment in much of thedeveloped world, and the huge financial imbalance betweenthe US and the rest of the world. Each of these factors is areality, not merely a risk. The only question is how the effectsof these realities will unfold over time. The risk is that theywill unfold in a disorderly and ultimately de-stabilizingmanner. The hope, of course, is that policymakers will takethe necessary steps to ensure a smooth transition to the nextstage of global growth.This report examines the various risks to the global economyand offers a point of view as to their future direction. Itsuggests possible scenarios and the future direction of interestrates, exchange rates, and commodity prices. The goal is tooffer some useful planning premises for global companiesthat are exposed to global risks.This report also looks at the world’s major economies and theissues they face. Of special interest are today’s most discussedeconomies: China and India. The question arises as to thestaying power of their extraordinary growth.