Uncertainty surrounding the war in Iraq and SARS, along with lagging trade and investment, have delayed a global economic recovery until later this year, the UN said Wednesday in its annual economic survey.
The UN report said gross world product (GWP), which increased by less than 2 percent last year, would inch up to 2.2 percent this year, accelerating slightly above 3 percent next year. The GWP is the aggregate value of all goods and services produced worldwide in a given year.
Last year's report had forecast a recovery late last year from a dramatic economic slowdown in 2001.
Ian Kinniburgh, director of the UN Department of Economic and Social Affairs that prepared the 18-page report, said concerns in the run-up to the March 20 US-led invasion of Iraq, which divided the international community, were the primary reason for the delay.
The uncertainty "discouraged consumers from spending, investors from investing and generally was the main factor we believe in derailing the recovery," Kinniburgh said, although he stressed that the military action was briefer and less disruptive than had been expected.
The report predicted that the end of the war, the containment of an outbreak of SARS in Asia and Canada and positive fiscal and monetary policies would pave the way for a US-led global recovery starting in the second half of next year.
"The world economy was beset by heightened geopolitical uncertainties in late 2002 and early 2003," the report said. "Such factors continue to pose a downside risk to global economic growth, but this risk diminished substantially in the second quarter of 2003."
But Kinniburgh warned it would take time.
"While we expect the recovery to take off in the second half of this year ... it will be a fairly slow acceleration," he told reporters.
Douglas Porter, a senior economist at BMO Nesbitt Burns Securities, said the UN forecast was similar to what his company was expecting.
"Overall the global economy has disappointed this year and I think that one of the main reason was the spike in oil prices and the war in Iraq," he said in a telephone interview from Toronto.
The report said the US was leading the recovery but faced a growing rate of unemployment, sluggish world trade and international financial flows. The UN also cited a risk of the possibility of deflation in a growing number of countries.
It said the dollar's recent depreciation would strengthen growth in the US but could dampen the stimulus provided by the Americans to other economies that depend on exports as an engine of growth.
World exports increased by only 2 percent last year and were expected to grow by less than 4 percent next year, according to the report.
"If this depreciation of the dollar is sustained, it will have major implications for global economic prospects," the report said.
Kinniburgh warned that some risks to the economy couldn't be foreseen, including the possibility of another large-scale terrorist attack.
"We also see from the SARS outbreak, although it was rapidly contained, these things very rapidly can have economic consequences of global dimensions," he said.
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