Global and Asian Economies 2002

The global economy grew 2.8% in 2002, an improvement over the 2.4% growth posted in the previous year. However, the pace of growth was slower than expected, as a weak recovery in the US economy, Japan's on-going economic woes and increased geopolitical risks depressed consumer and business sentiments in the major economies.

Following the recession in 2001, the US economy expanded by 2.4% in 2002, up from 0.3% the year before. This was supported by strong consumer demand. Aggressive policy actions by the US Federal Reserve which brought interest rates to a 40-year low, as well as tax cuts have increased household purchasing power. This in turn fuelled consumer demand for housing and cars. However, business spending remained sluggish due to poor investment sentiments, which worsened on the onslaught of a series of corporate scandals and poor earnings. The war in Iraq, coupled with concerns over terrorism and the nuclear stand-off with North Korea further stalled business investments.

Slower growth in the US economy, which is the main driver of global economic growth, coupled with war in the Middle East, have in turn capped the growth momentum in the EU countries. Average growth of the EU economies stood at 0.7% in the first nine months of 2002, as compared with 1.6% for the whole of 2001. Consumer spending also slowed down as unemployment remained high at 7.6%.

The Japanese economy was sluggish in 2002, growing by a marginal 0.3%. Private investments continued to languish, declining by 4.5% after posting flat growth in 2001. Consumer demand in Japan also remained weak, as lower wages and rising unemployment dampened buyer sentiments. Unemployment rose to an all-time high of 5.4% in 2002, compared with 5.0% in 2001.

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