The global economy will recover next year, growing as much as 2.5 percent by the World Bank's estimate, as a US rebound starts to pull Europe and Asia out of their slumps.
"While America will once again be the engine for global growth, it's not going to be running on all its cylinders," said Paul A. McCulley, who manages more than US$90 billion for Pacific Investment Management Co in Newport Beach, California.
OECD predicts that its 30 members, including the US, Western Europe, Japan, Canada, Mexico, South Korea and Australia, will grow by 2.2 percent next year, up from 1.5 percent this year. The US may expand 2.6 percent, Europe 1.8 percent and Japan 0.8 percent.
Japan's banks are struggling under more than US$435 billion worth of non-performing loans, European businesses are limiting capital spending until demand at home increases and neither housing nor consumer spending is apt to add to growth in the US.
There are brighter spots in Asia outside of Japan. China is expected to grow by 7.5 percent next year and South Korea by 5.4 percent, according to Blue Chip Economic Indicators, a survey of 54 leading US economists.
"I don't understand all this screaming and yelling" about US prospects, Nobel Prize winner Milton Friedman, the former University of Chicago economics professor, said in an interview. "We're still recovering from a big bubble. The economy is in fine shape."
The prospect of a war with Iraq may upset some forecasts. The dollar fell to its lowest against the euro in more than three years last week amid concern the US will attack Iraq and North Korea will resume development of nuclear weapons. Oil prices, already above US$30 a barrel, may rise further.
The growth forecasts by the Paris-based OECD assume some rebound in corporate profits and business investment in the US, with stagnation in much of the rest of the world and rising unemployment that will pressure policy makers to cut interest rates and taxes.
The unemployment rate is 6 percent in the US, 7.7 percent in the 15 countries that have made up the EU and 5.4 percent in Japan, just below the post-World War II record high of 5.5 percent reached a year ago.
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