World Economic Growth Expected to Slow in 08


This is the VOA Special English Economics Report.

World economic growth remained strong in two thousand seven. The International Monetary Fund estimated growth at five and two-tenths percent.

But predictions for two thousand eight call for slower growth in the world economy. In October the I.M.F. cut its estimate for global growth this year by almost half a percentage point, to four and eight-tenths percent.

A house on the market in Denver, Colorado
A house on the market in Denver, Colorado

There are worries of an economic slowdown or possibly a recession in the United States. The most important issue for two thousand eight may be the American housing market.

The market has been hit by a combination of falling home prices and the subprime mortgage crisis involving high-interest loans. Losses on investments tied to these risky home loans have affected not only American banks but banks around the world.

Worries over the credit situation have caused banks to limit their lending, even to each other. Central banks have tried to ease credit fears by lowering interest rates or lending billions of dollars, or both.

Another major issue for two thousand eight is what effect energy prices will have on economic growth. The price of a barrel of oil doubled in two thousand seven. And on the second day of two thousand eight, the price hit one hundred dollars for the first time.

Rising oil prices in recent years have been good for oil producing countries, though, including those with sovereign wealth funds. These are state-owned investment funds also held by China, Singapore and some other countries.

The growing activity of these government-controlled investment funds makes them something else to watch in two thousand eight. Lately they have been used in some cases to invest in Western companies hurt by the subprime mortgage crisis.

Abu Dhabi, in the United Arab Emirates, has what experts believe is the world's biggest sovereign wealth fund. Some estimates put the value at nine hundred billion dollars. But last month came news of plans by Saudi Arabia for what could be an even wealthier fund.

The dollar continued its drop against most major currencies in two thousand seven. This has made American exports less costly. Still, the United States is expected to report a trade deficit with China of almost three hundred billion dollars last year. Some experts say the deficit will continue to be a problem so long as China does not let its currency rise more quickly against the dollar.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Bob Doughty.