The world economy [May 2001]

Since the publication of our last Commentary in January 2001 the extent of the slowdown in the world economy has become a little clearer. There has been a further easing of monetary policy in the United States and Japan, although interest rates in the Euro zone have yet to be cut. Most commentators expect that the US economy will start to recover later in the year, though it is extremely unlikely that growth will return to the levels experienced over the past four years. Prospects for the European Union look more positive, partly due to the weakness of the Euro, while there must be concern that there are indications that the Japanese economy is faltering. It seems unlikely that the global slowdown will result in a major recession, although there are some risks attached to this relatively benign view.