Economists Foresee Slight Slowdown in World Growth

Business role in Internet governance also seen as necessary

Paris and New York, August 22, 2006 – After two years of robust economic growth, prospects for the global economy dimmed slightly in the third quarter, an about-face from more than a year of rosy forecasts, according to the latest World Economic Survey by CESifo and the International Chamber of Commerce, released today.

More than 1,000 experts from 91 countries took part in the survey, among them corporate economists from multinational companies, academic economists and chamber of commerce executives.

With more than 8,000 member companies in over 140 countries, the Paris-based ICC is the largest, most representative private sector association in the world. It is represented in the United States by the United States Council for International Business (USCIB), its American national committee based in New York.

This slight tempering in expectations for business activity was seen in assessments for the world economic climate and predictions for the next six months. The Ifo index fell to 105.6 from 111.0 the previous quarter, while prospects for the coming six months dropped to 96.5 from 108.8 previously. However, assessments of the current economic situation continued to improve, registering 115.1 for the third quarter versus 113.2 in the second quarter.

“The present trend was set in motion in the second quarter. While the economy was still seen as favorable, expectations were starting to wane amid downward pressures brought on by steeply rising oil prices,” said Gebhard Flaig, executive board member of the Ifo Institute for Economic Research.

“The latest results indicate the world economy is approaching a cooling-down phase of the growth cycle,” he added.

The sharpest falloff in expectations was registered in North America, where the world economic climate index dropped to 98.0 from 114.8, whereas views of the current economic environment edged up slightly. The survey indicated the U.S. would grow at a slower but more sustainable pace but would see a rise in inflation. For Asia, prospects for the economic climate deteriorated somewhat for the second quarter in a row.

In Europe, economists remained equally optimistic about the economic climate. “In almost all euro-area countries, the same pattern in business sentiment could be observed: assessments of the present economic situation improved, but economic expectations have been downgraded,” the survey said. Only the U.K. bucks this trend with steady improvement seen currently and six months ahead.

As high prices for energy and raw materials feed through the world economy, experts see inflation inching up to 3.5 percent from 3.1 percent in the last quarterly survey. Inflation in the U.S. is seen slightly above 3 percent for the second year in a row. In the euro area, inflation is expected to remain moderate at 2.2 percent. In Asia, inflation is seen inching up slightly to 2.9 percent.

The U.S. dollar is viewed as fairly valued, while the euro and the British pound are considered overvalued. For the third quarter in a row, the Japanese yen is seen as undervalued.

Short-term interest rates worldwide are expected to rise in the second half of the year except in Russia, Indonesia and Brazil. The increase in long-term rates is expected to be muted in most countries.

Views on how the Internet should be governed

A growing debate is emerging in government, policymaking, civil society and business circles concerning how the Internet should be governed. To foster dialogue among these stakeholder groups, the United Nations has established the Internet Governance Forum, which will convene in Athens in October. To date, the Internet Corporation for Assigned Names and Numbers, an international non-profit, has been largely responsible for managing many of the important technical functions of the Internet.

A special question in the survey asked respondents who should govern global Internet network-business (a global multi-stakeholder forum) or governments and queried how concerned respondents are about recent attempts by intergovernmental-organizations to get involved in the technical management of the Internet. A second question was aimed at determining how great a role business should play in shaping future policies affecting how the Internet is governed.

Experts in most countries said business should play an active role in these processes. Respondents expressed a desire for an especially strong role for business in the UK, Norway, New Zealand, Peru, Paraguay, Costa Rica, India, Nigeria, Zimbabwe and Kazakhstan.

A large share – 35 percent of the economists surveyed – voiced strong concerns over the involvement of intergovernmental organizations in the Internet, notably in China, Zimbabwe, Mexico and Nigeria.

A higher degree of confidence in a possible role for intergovernmental organizations was expressed by some economists in Europe, Latin America, Russia, New Zealand and the United Arab Emirates. At the same time, 44 percent of the U.S. respondents said a stronger role of the U.S. government in regulating the Internet would be welcome.

USCIB promotes an open system of global commerce in which business can flourish and contribute to economic growth, human welfare and protection of the environment. Its membership includes some 300 U.S. companies, professional service firms and associations whose combined annual revenues exceed $3 trillion. As American affiliate of the leading international business and employers organizations, including ICC, USCIB provides business views to policy makers and regulatory authorities worldwide and works to facilitate international trade.

Contacts:

Elizabeth Thomas-Reynaud, Communications and Media Relations Officer, ICC
+ 33 1 49 53 28 22 or etd@iccwbo.org

Jonathan Huneke, USCIB
+1 212.703.5043, jhuneke@uscib.org

View World Economic Survey graphs for Asia, Europe, Western Europe and North America(ICC website)

View a regional breakdown of responses to the Internet governance questions (ICC website)

Staff Contact:   Kira Yevtukhova

Deputy Director, Marketing and Communications
Tel: 202.617.3160

Kira Yevtukhova manages USCIB’s print and online publications, including the website, e-newsletter and quarterly magazine, and serves as the organization’s digital media strategist. Prior to this role, Kira worked for over five years within USCIB’s Policy Department, focusing on climate change, environment, nutrition, health, and chemicals related policy issues. She is a graduate of Mount Holyoke College and is currently pursuing an MBA at Georgetown’s McDonough School of Business.
Read More

Related Content