The world economy [June 2006]

Growth in the world economy remains robust with both China and India experiencing fast growth. The US continues to have strong growth despite a slight weakening in the last quarter of 2005. Consumption and investment are much more important in Japan now, driving growth forward. Exports are also contributing significantly to Japanese growth. The Euro Area grew below trend in 2005 but is forecast to have stronger performance in both 2006 and 2007. However, the main impetus to growth is external to the OECD. World growth is forecast to be 4.8 per cent per annum for the four years ending in 2007 compared to average growth of 3.4 per cent per annum for 1975 to 2003. Oil prices are expected to be close to $60 but the decreased dependency on oil of the advanced economies has meant that it has had little impact on inflation.