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Financial Post, Weekly edition, Thu 17 Aug 95, page 13

Keywords: International finance Economic forecasts World Canada ax, there was deepening concern over the world economic recovery. GDP growth predictions were being downgraded. The possible knock-on effect of Mexico's crisis still had many nervous.

However, while global growth is slowing it looks asiness School (LBS). After its pause, growth should pick up again in the U.S. in the second half. Recovery in Europe remains robust. The centre is still predicting pretty reasonable annual world economic growth of 2.5%-3% over the next few yeaays. Short-term rates in the U.S. and Germany could move higher later this year or early in 1996. This will push the world level up again, but nothing dramatic, he predicts.

The LBS team's latest world outlook has GDP growth for the G- recovery. For the rest of this decade it expects trade growth will be higher than any other five-year period in the last 30 years. Last year trade growth was up 10% overall. Trade in manufactured goods increased 7.6%. This component should in Latin America, this should be short-lived. Meanwhile, other developing economies are growing strongly. Many countries making the transition to market economies are progressing more rapidly than expected - the Czech Republic and Poland, fn annual 10% over the next two years. South-east Asian countries will likely grow 7% a year.

High-growth economies are bound to run into some instability. ''It's difficult for them to grow in a balanced way,'' Sentance says. Mexic this stage of the cycle. Japan's an exception, with still very weak growth. The yen's high value has been a drag. The financial sector remains troubled. GDP growth this year is expected to be well below 2%, but should pick up to 2.5%- 3% annuentre is not expecting inflation worldwide to rise much above 2.5%. Monetary authorities are more sensitive now to small variations in inflation, and moving to put the brakes on early.

''The overall climate for sustainable world econogrowth could continue for a long time yet.

DNOTE (Ed. note) Neville Nankivell is The Financial Post's editor-at-large based in Ottawa.

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