What is MacroWeb?

You don’t have to be a keen economist to know that world growth has been affected by the recent war in Iraq. The International Monetary Fund (IMF), reported that the world will probably experience tepid economic growth this year, and even with the quick end to the Iraq war there are a host of other problems.

The IMF, issuing its latest World Economic Outlook, lowered their expectations for global growth to 3.2 percent for this year from an expectation of 3.7 percent last September. Much of the markdown was due to a temporary jump in world oil prices over worries about supply disruptions.

For the past three months, concerns over conflict in the Middle East have weighed heavily on the global economy, through oil prices, through confidence effects, and through financial markets. Even the growth rates in the reduced forecast might not be realized because of various threats ranging from lingering shocks from the bursting of the U.S. stock market bubble, to rising budget and trade deficits, and rigid labor markets in Europe and Japan’s weak banking systems.

The IMF took the world's major economies to task for a variety of failings, including too much secrecy at the Federal Reserve and the central banks of Europe and Japan. IMF officials said the world's major central banks should do better at telling financial markets what they can do to combat the threat of deflation that has already gripped Japan and is seen as a threat in the United States and Europe. While the Bush administration says a new round of $726 billion in tax cuts is the centerpiece of its strategy to bolster the flagging U.S. economy, many people think the Bush tax package is "awkwardly timed," given that it would further worsen a federal budget deficit that is already ballooning because of the costs of the Iraq war.

Bibliography

Vance, Lyle. (2003, Apr. 18). “IMF Trims Forecast For 2003 World Economy On War With Iraq, Oil Prices.”

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