II. THE WORLD ECONOMY

Mr. Speaker Sir,

13. During 2003, global output surpassed the low predictions made in 2002 and is now projected to grow by 3.2%. This is largely a result of a persistent global recovery, helped by a growing optimism over the short duration of the war in Iraq. World output is also predicted to increase by 4.1% in 2004, although such a high projection materialising is dependent on a number of factors that are susceptible to change. These factors include the uncertainties governing the conflict in Iraq, differences in macroeconomic stimulus between the major economies, movements in major currencies, and the continuing output and productivity growth in advanced economies.

14. World Trade volume increased by 3.2% at end 2002 but the annual rate of growth in 2003 is projected at the slightly lower 2.9% from previously higher projections. The revision reflects the growing level of uncertainties exacerbated by the collapse of the world trade negotiations in Cancun, Mexico in September 2003. Oil prices rose sharply during 2003 hovering around the $30 per barrel mark for much of 2003 although a small fall in price has been registered since early September.

15. The low global inflation environment continued in 2003 as annual inflation in developed economies remained under 2% whilst in developing countries it stayed above 5% for both 2003 and the projection for 2004. The rate of growth in output for sub-Saharan Africa is projected to increase to 5% in 2004 from the 3.1% projected for end 2003. However this positive outlook hinges upon the maintenance of political stability and the occurrence of favourable weather conditions.

16. Once again, a wide diversity exists between the GDP growth rates of different African countries. The common trend, however, has been the fact that those countries that have initiated the requisite institutional and structural reforms as well as maintained macroeconomic stability have recorded the most impressive growth rates.

-end.