World economic growth was quite buoyant in 2004 recording 5.1 percent growth in World GDP – the strongest in three decades. It will moderate in 2005 but, to a more sustainable level of 4.3 percent. Growth has been strong in most emerging economies led by China. Inflationary pressures remained subdued and monetary tightening underway in most countries will keep these pressures well contained.
This benign and favourable outlook is likely to persist if the key risks are mitigated adequately. The key risks to the global outlook are (i) a further sharp increase in oil prices; (ii) continued fiscal and current account imbalances in the United States and (iii) sluggish demand in European Union and Japan. There is no doubt that the U.S. is living beyond its means.