UNECE forecasts continued growth in 2005

UNECE forecasts continued growth in 2005

The United Nations Economic Commission for Europe (UNECE) today released data from its first economic survey of Europe for 2005. According to the report, the Commission expects economic growth to continue in Europe and CIS, with rates varying between sub-regions. The global economy is forecast to grow 4.25% in 2005, 0.75% points lower than in 2004, when the global economy grew the fastest in the past thirty years. The United States and China will continue to be the locomotives of global growth. Other emerging markets in Asia and Latin America are also expected to show significant growth, albeit lower than last year. The real GDP of the United States is expected to increase around 3.5% in 2005, down from 4.4% in 2004. The real GDP of the euro area is forecast to increase around 1.8% in 2005. Exports will fuel growth in the euro area. The economic growth of Western Europe as a whole will be around 2.25%. The economic growth of the European Union (EU) will be 2.2% in 2005. Growth in central Europe and the Baltic states will be 4.25% in 2005, above the average of Western Europe. The average annual growth rate in Southeastern Europe will be strong, with more than 5% growth of real GDP expected in 2005. Turkey has a significant impact on leveling the average annual growth rate in the area. Russia's GDP growth will drop to 5.8% this year, compared to 6.8% in 2004. The real GDP in the CIS is expected to grow 6.5% in 2005, a remarkable decrease from last year's 12.4%. Kazakhstan and Belarus will have the highest GDP growth with 7.9% and 9% growth respectively. However, both will experience slower growth than last year, when Kazakhstan posted 9.3% growth and Belarus 10%. The huge current account deficit of the United States, the uncertainty about the strength of personal consumption, and uncertainty surrounding long-term interest rates are the factors that negatively affect economic growth in the US. In the euro area, the strong reliance on export growth constitutes a danger if global growth comes out lower than expectations. The most important structural weakness of the CIS economies is their high dependence on exports of natural resources and low value added products. This leaves these economies especially vulnerable to external shocks.