II. THE WORLD ECONOMY

Mr. Speaker,

• Unforgettable events in the year 2001 led to a downward projection of world output growth to 2.6% from the impressive annual growth rate of 4.7% recorded in 2000. Even before the September 11^th incident, the growth rate of the world economy was predicted to slow down following the declined performance of the U.S. economy in the first two quarters of the year. However, the outlook was much worsened by the developments in this last quarter of 2001.

• From a 12.4% high in 2000, the annual percent change in the volume of world trade is projected at 2.7% as a direct result of the decline in output growth for all the key economic regions. The increased oil prices from 2000 did not help the situation as monetary policy was tightened in the U.S. and some major European countries, while the increased inter-linkage of capital markets heightened the impact of the fall in confidence level on global demand and trade flows.

• Oil prices have since registered a fall following the sharp increase after the terror attack on America, and now stand far below the average barrel price of $28 experienced last year (2000). The price decrease was helped by the easing of monetary policy by the Federal Reserve in the USA.

• Sub-Saharan Africa is projected to register a modest output growth rate of 3.8% at end-2001 due to declining commodity prices coupled with the global contraction in trade leading to a fall in exports. However it must be emphasised that the economic prospect is brighter for the African countries that have a stable macroeconomic background and sound structural policies. These policy objectives continue to be at the centre of Government's economic strategy in tandem with poverty alleviation, thereby minimising the effects of uncertain developments in the world economy. A case in point is the bright prospect for our tourism industry this season despite the global economic downturn.