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Canada's economy set to outpace G7 average

John Zarocostas For The Financial Post

Financial Post, Daily edition, Wednesday, July 2, 1997

Spurred by a recovery in international trade, the world economy will grow by 3% this year, a United Nations report published today says.

The volume of exports is expected to increase by nearly 8% in 1997, mainly because of strong demand in developing countries and North America, says the report, titled World Economic and Social Survey 1997.

Last year, exports increased by 4.6%.

The UN report predicts the Canadian economy will grow by 3.5%, substantially more than the 2.25% average growth forecast for the other Group of Seven countries.

``The Canadian economy seems to be heading into a period of growth above 3%,'' says the report, which draws on data from 70 economic forecasting models worldwide.

It attributes the performance of the Canadian economy to the fall in interest rates, made possible by low inflation.

The lower rates have begun boosting domestic demand and growth in private consumption reflects a rise in consumer confidence.

But the report also says the weaker components of demand will remain government spending, because of stiff austerity measures.

As a result of further cuts in the public sector, ``joblessness, which is almost twice as high as the U.S., is not expected to decrease substantially.''

The report says developing countries -- fuelled by strong growth in China and other Asian economies -- will achieve an above-average increase in gross domestic product of 6%.

The Chinese economy will grow by 10% this year, Indonesia by 7.5% and India and Thailand by 6% each. The report also predicts Argentina's economy will grow by 5.25%, Mexico's by 4% and Brazil's by 3.75%.

Annual % change 1981-90 1991 1992 1993 1994 1995 1996(2) 1997 (3)
World 3 2.8 0.8 1.8 1.3 3.0 2.4 3.0 3
Developed economies 2.9 0.8 1.6 0.7 2.6 1.9 2.4
Economies in transition (4) 1.7 -9.2 -13.6 -9.1 -4.4 -1.4 -0.9 2
Developing economies 2.4 3.3 5.2 5.2 5.5 4.6 5.7 6
Memorandum items
Number of countries with rising per capita output 106 72 76 64 99 107 122 127
Number of countries in sample 127 127 141 142 142 142 142 142

1 Calculated as a weighted average of individual country growth rates of gross domestic product (GDP), where weights are based on GDP in 1988 prices and exchange rates.
2 Preliminary estimate.
3 Forecast based in part on Project LINK.
4 Based on reported GDP, which seriously underestimates activity in several countries.

Source: This information is provided by the Financial Post.

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