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The high oil price, which contributed to the global slowdown in the second half of 2004, is expected to continue to weaken economic activity in the coming months. Other factors, such as the decline in economic policy initiatives from the United States and the slight leveling-off of the boom in China, have led to a slower rate of expansion. It is anticipated, therefore, that there will be a decrease in global economic growth in 2005, although not a downturn. The world economy should be able to grow at a considerable pace, at a rate forecast to be around 4 percent. We also anticipate a rapid expansion in world trade, even if this is not as fast as in 2004. The global growth differential is unlikely to change. The strongest impetus is still coming from Asia and the United States, while demand in the eurozone remains muted.
This generally positive assessment of macroeconomic trends cannot hide the fact risks still exist. We have to wait and see whether the easing of the oil market since the beginning of 2005 is here to stay. An additional risk factor is the uncertainty about future movements in the dollar, with the macroeconomic imbalances in the United States continuing to have an adverse effect. The massive current account deficit and the high budget deficit are damaging confidence in the dollar and might trigger further exchange rate movements and therefore lead to further appreciation in the value of the euro.
