World economy: Light dampener for the economic recovery

The Ifo indicator for the world economic climate (WES) fell slightly in July, after an upward trend in the two preceding surveys. At a level of 101.1 points (1995 = 100), however, the world economic climate is still somewhat higher than the long-term trend. The decline in the index is exclusively attributable to less optimistic expectations for the coming six months, even though the experts still believe that the upswing will continue. On the other hand, the appraisals of the current economic situation continued their positive trend. This data constellation signals a continuous recovery of the world economy in the coming months, which, however, might be weaker than the expectations expressed last spring. On average for the 90 participating countries, the US dollar and the British pound sterling are still regarded as overvalued, whereas the euro, which for a long time had been assessed as undervalued, is gradually reaching a level that is judged as appropriate. According to the opinion of the WES experts, the Japanese yen has largely achieved this equilibrium level. The average international inflation rate for 2002 will stand at 3.3%, after a 3.4% rate was expected in the April survey. This will be noticeably lower than in the previous year (3.8%). In the special survey questions related to the Johannesburg Summit for Sustainable Development that were answered by 970 WES experts in 89 countries, the general assessment was that the summit participants should concentrate more on the integration of ecologically responsible measures than on socially responsible behaviour.