But risks abound for world economy in 2008

Chinese worker erecting New Year decorations. Photo: China Daily

The credit crunch in several key markets, coupled with housing market woes, will result in a sharp slowdown in OECD* economic growth in 2008. But the impact of this developed world weakening on the global economy will be partly offset by continued robust growth in many emerging market countries, according to 2008: country by country, just published by the Economist Intelligence Unit.

The report predicts that the world’s two largest developed economies, the United States and Japan, will be among the ten slowest growing countries in the world in 2008. But four emerging market economies, including China, will grow at a double digit pace next year.

Continued robust economic growth will, however, will be  accompanied by an unusually high level of political and economic risks during 2008.

Downside threats include:

• An further increase in the severity of global financial-market woes
• Strong inflationary pressures arising from higher food and oil prices
• A sharper-than-expected slowdown in world trade growth
• Geopolitical risks, including continued worries about Iran's nuclear ambitions, ongoing tensions in the Middle East and political instability in a number of key countries

2008: country by country, the well-established annual forecasting guide from the Economist Intelligence Unit, contains a concise assessment of the political and economic prospects for the year ahead for almost 200 countries, together with key economic indicators and a summary of forecast numbers.

Highlights in the 2008 edition include:

• The EIU expects Hillary Clinton to win the US presidential election. Crucial elections will also take place in Ukraine, where we expect to see the emergence of an "Orange" coalition, as well as in Pakistan and Iran.  
• GDP growth in the US economy will slow to 1.5%, due to continued financial-market turmoil and an increasingly severe downturn in the housing market. The probability that the US economy will tip into recession is 40%.

• Investment growth will be restrained in several EU countries as the ongoing credit squeeze leads to tighter bank lending policies. 
• Inflationary pressures will rise across the world, but Asia and the Middle East will be the most vulnerable.  
• Asia will remain the world's most economically dynamic region, with China, India and Vietnam seeing especially strong growth.  
• Political instability and issues of governability will constrain growth in Latin America.  
• Sub-Saharan Africa will enjoy its strongest economic performance since the 1970s owing to increased oil production and mineral extraction.

*The Organisation for Economic Co-Operation and Development is a government think-tank for mainly industrialised countries.

OECD member countries - - Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States (30 Member Countries).