WASHINGTON (AP) — Although not running on all cylinders, the global economy should pick up some steam in 2004, the World Bank said.
Concerns persist about budget and trade deficits in the United States, stagnation in Europe and lingering deflation — a destabilizing fall in prices — in Japan, the bank said.
The bank lowered the world's overall growth prospect Wednesday for this year to 2 percent from the 2.3 percent forecast in April. It also cut the forecast for 2004 to 3 percent from 3.2 percent.
"The global economy continues to sputter," according to the bank's annual "Global Economic Prospects" report.
"Although some signs of turnaround have been evident in the United States, Europe seems to be losing momentum and Japan appears headed for another disappointing year."
Gobind Nankani, the bank's vice president for the poverty reduction and economic management network, said that "global economic prospects are looking somewhat better although there are some uncertainties ahead of us."
Among those uncertainties are continuing unrest in the Middle East, high oil prices and a steep fall in the value of the dollar.
Despite the sluggishness in the industrialized countries, the outlook for developing countries was brighter, with the bank forecasting growth of up to 5 percent for 2004.
The report said that although prospects for 2004 were improved, growth will not be strong enough to cut sharply into unemployment rates.
"Structural problems persist — overcapacity in high-tech industries globally, rising twin deficits in the U.S. fiscal and current accounts and lingering bad loans in Japanese and, to a lesser extent, European banks," the bank said.
The bank said global economic growth and poverty reduction could get a boost if progress on an international trade treaty emerges at next week's World Trade Organization meeting in Mexico.
Officially, the meeting is an interim assessment for international trade negotiations that are scheduled to be completed by Jan. 1, 2005. The bank said that "a trade deal that addresses the concerns of developing nations could reduce poverty by as much as 144 million people by 2015."
Among those concerns are agricultural subsidies rich countries pay their farmers and tariffs they impose on manufactured products such as textiles.
Developing countries have insisted they would not consider giving ground in areas of interest to the United States and Europe such as reducing tariffs on industrial goods unless America and European nations stop subsidizing farm exports.
Taxpayers in rich countries spend about $300 billion each year supporting their farmers, which the bank says is larger than the gross domestic product of all African countries combined.
For example, the report said Japanese support to rice producers amounts to 700 percent of production costs, which shuts out exports from Thailand, Vietnam and other countries. Annual cotton subsidies to U.S. farmers depress world cotton prices and crowd out poor but efficient farmers in West Africa, Central and South Asia.
Richard Newfarmer, the lead author of the bank report, described the subsidies as exorbitant and said they went not to poor farmers but to farmers with higher incomes than their average fellow citizens.
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