Resilient European economy spells optimism for developing nations

Date: 12/04/01

By Dennis Abbott

THE European economy is likely to prove more resilient than those of the United States and Japan during the next 12 months, according to the World Bank.

This will in turn boost prospects for growth in developing countries that depend heavily on the performance of the EU.

Uri Dadush, director of the bank's development prospects group says that while overall Latin America is likely to be one of the "most vulnerable regions to market sentiment", projections for Brazil and Argentina are more optimistic because of their trading links.

This is in contrast to Mexico, whose production is intricately interwoven with the faltering US economy through the North American Free Trade Agreement (NAFTA).

Dadush unveiled the World Bank's new global development finance report in Brussels on Monday. It forecasts that world gross domestic product growth will bottom out at 2.2% this year and climb to 3.3% in 2002.

"An early recovery from the current slowdown is more likely than prolonged slow growth because underlying technological and productivity trends are favourable," he said.

"The scope for policy adjustments - such as interest rate cuts and tax cuts - is greater and emerging market economies are less vulnerable, having allowed more flexible exchange rates and reduced short-term indebtedness."

The European economy is likely to prove more resilient than those of the United States and Japan during the next 12 months, according to the World Bank. This will, in turn, boost prospects for growth in developing countries that depend heavily on the performance of the EU.