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Section I. Recent economic developments
Published online by Cambridge University Press: 26 March 2020
Global economic activity has continued to gain momentum in recent months and a cyclical upturn is now clearly underway. The rate of growth of world GDP is projected to rise to just under 4¼ per cent this year, from an estimated outturn of 3.4 per cent last year. Growth is expected to accelerate in all the major regional markets for the first time since 1994. The improving economic prospects are already apparent in the trade statistics for the latter part of last year. World trade growth, measured in terms of merchandise trade volumes, is expected to rise by 9 per cent this year from 5½ per cent in 1999.
1 See the transcript of the appearance by Willem Duisenberg before the Committee on Economic and Monetary Affairs of the European Parliament, available at http://www.ecb.int/key/00/sp000320.htm
2 The US consumers' expenditure equation on NiGEM has a net wealth elasticity of 0.181 per cent. At the end of 1999, net financial wealth was $28.11 billion, whilst personal con sumption expenditure at 1996 prices was $6.15 billion at an annual rate in December. Hence a $1 change in net wealth will change expenditure by (1.0∗0.181∗6.15/28.11) = 3.96 cents.
3 A sustained drop of 20 per cent in US equity prices would reduce net financial wealth by 9½ per cent at end 1999 val ues, if all other factors remained unchanged. This would even tually reduce the level of consumption by around 1.7 per cent. In practice the Federal Reserve can act to offset the impact of lower equity prices if it so chooses, as shown in the analysis in the July 1999 Review.
4 The programme envisages that the budget deficit will be I per cent of GDP in 2000, 1½ per cent in 2001, I per cent in 2002 and ½ per cent in 2003.