Executive summary world outlook

Abstract

The world economy is going through a calm period now, and no major downturn is projected during the next five years. Nevertheless, given the continued large trade imbalances, a crash landing cannot be ruled out. World growth will be slower in the next two years because of higher interest rates, fiscal tightening, and a cooling off of Europe's capital spending boom. The dollar will remain strong in the near term, but will weaken again after the U.S. presidential elections, and next year. There is a risk that if action to reduce the U.S. budget deficit is not taken swiftly enough, a crisis of confidence will push the dollar down sharply. A weak outlook for commodity prices means weak growth prospects for LDCs over the next few years. The outlook for these countries would be even weaker if a dollar-crash scenario were to unfold.