Global economy turning corner

The good news for the world is that a faster rate of growth is expected for 2004-2005, meaning that we are leaving the nasty slump times of the past several years behind. The Americas and Asia, two of the three global economic engines, are registering some robust growth rates in many of the most important indicators. The United States and China in particular, is doing exceptionally well. The bad news is that for Europeans, the third engine, might expect a more turbulent path to economic prosperity. Despite projected to show positive growth, the European Union (alongside Japan) will find it hard to perform to its full potential. Two reasons suggested by the Economist are the relative inflexibility of the job market and the 44% surge in the euro over the last 30 months. Since the dollar is expected to fall further against the euro, the situation might not be alleviated anytime soon.

Fortunately for Britons, the pound’s weakness against the euro means that any lack of currency-induced competitiveness that we might have against the US will be compensated by the increase in competitiveness of our EU exports. For businesses in the Highlands & Islands, they will probably end up being slightly better off since there is a slightly greater weightage of trade towards Europe. Once again, Britain is proving to lead a charmed life as it was already one of the least affected nations during the global recession.