Forecasts of the Scottish economy [June 2003]

The world economy has shown some signs of slight weakening in the first quarter of this year. There is also however some good news in that the uncertainty that was caused by the conflict in Iraq has largely been resolved. This was due to rapid progress in a land war without any major problems. Oil prices have fallen although not as sharply as expected but this has eased concerns about inflationary pressures. Equity markets have increased and confidence has been strengthened. Currencies have also realigned and this will probably narrow the current imbalances in the global economy in due course. The US continues to lead the world recover y and Japan has performed better than expected. On the downside however the Euro Area still appears to be relatively weak. The main issue facing the global economy at the moment is deflation with Alan Greenspan expressing concern over this issue while Wim Duisburg has dismissed deflation as a problem for the world economy.