Mr. Speaker, Sir,
9. At the beginning of 2004, the World Economy
appeared set to achieve at least 5 per cent real GDP growth on a year-to-year
basis, the strongest in two decades. But, higher oil prices and declining
momentum in the US and Chinese economies suggest that global growth
may fall slightly short of 4 per cent. The year-over-year outcome for
2004 was well above the potential growth rate of World real GDP. Hence,
one would normally expect some slow down in output growth for 2005.
10. Despite the rise in oil prices, and high interest
rates, the prospect for the World Economy in 2005, by and large, remains
reasonably strong. This is due mainly to the recent robust recovery
in the World’s two largest economies, the USA and Japan.
11. The growth in the World Economy is expected to
decline to about 3.5 per cent in 2005. Output growth has been particularly
strong outside of the OECD. Output growth in the Euro area and Japan
is constrained by the strong Euro and the Yen. Higher oil prices are
boosting the income of oil exporting countries in the Middle East and
Africa, but tend to compromise growth in oil importing countries, especially
the developing countries. Growth in 2005 is forecasted at 1.9 per cent
in the Euro area, 2.5 per cent, UK, 3.3 per cent in the US, and 2.9
per cent in the OECD.
12. Real GDP growth in Sub-Saharan Africa is projected
at 4.8 percent in 2004, and forecast to rise to 5.8 percent in 2005.
In Nigeria, real GDP is projected to slow to 4.6 per cent in 2004-05,
as the boom in oil production in late 2003 and 2004 began to wane. While
windfall oil revenues are boosting the overall fiscal balance, the non-oil
deficit is large and rising.
13. Since the year 2000, Japan has
been experiencing deflation. For the first time in five years, inflation
is expected to be about 0.1 per cent in 2005. For 2004, inflation was
a little more than 2.1 per cent in the Euro zone, and is projected to
be 1.8 per cent in 2005. Inflation is forecasted at 2.3 per cent in
USA in 2005. The sharp increase in oil prices and the uncertainty about
their future development, as well as their possible impact on inflation
and interest rates, are additional reasons for concern. Due to the general
increases in commodity prices, inflation rates have begun to pick up
around the World. The pass-through effects of energy prices to broader
price indices may probably be felt in 2005. Mr. Speaker, Let me now
turn to the Domestic Economy.
-end.