The '2002 APEC Economic Outlook'
report predicts that APEC economies are expected to lead a global economic recovery in the coming twelve months.
Presented to Leaders and Ministers of the 21 APEC member economies meeting in Los Cabos, Mexico this week, the report also warns that regional economies must be on guard against potential economic spoilers.
Chair of the APEC Economic Committee, Dr AHN Choong-Young, has warned that the fallout from accounting scandals mixed with poor corporate profits, the potential of rising oil prices and widening external balances have the potential of hampering APEC led economic growth.
Dr Ahn said the report concludes that continuing programmes of economic structural reform are crucial to maintain an environment favourable to economic recovery and job creation.
"As a whole the APEC economy is expected to grow by over 3 percent for the year 2002 and 4 percent in 2003. This is a substantial increase from the growth rate of 0.5 percent in 2001," said Dr Ahn.
However, this is also a time when regional economies must be on guard against potential short-run risk factors.
Poor corporate profits combined with corporate accounting scandals and their implications for world financial markets have the potential to cause harm.
"However it must be noted that despite the series of corporate scandals over past months, confidence in the U.S. financial markets has been maintained."
Dr Ahn said while the possibility of rising oil prices is not a new concern for the global economy it has the potential to be an impediment to growth.
"Despite the fall in overall commodity prices last year, since early 2002 oil prices have risen slightly due to increased demand and political anxiety in the Middle East," said Dr Ahn.
"While greater demand caused by economic growth will continue to place upward pressure on oil prices, it is anticipated the average price will remain at around US$25 per barrel. The potential for heightened tensions in the Middle East over a prolonged period has the potential to contribute to further increases in the price of oil."
The report notes that a further area of potential concern over the coming year is the apparent widening of external imbalances in major APEC economies.
"In 2001 member economies in the Western Hemisphere and Oceania, with the exception of Canada, have registered rising current account deficits while all member economies in Asia recorded large surpluses," said Dr Ahn.
"This imbalance has been led by a reduction in demand for high-end technology exports from the United States while at the same time demand for electronic appliances and machinery principally from Asian economies has increased."
The 2002 Economic Outlook concludes that in order to ensure sustained economic growth over the medium-term, APEC members are advised to continue with structural reforms to improve the efficiency of their own economic systems.
"Attention to structural issues such as improvements in corporate accounting and auditing procedures are very important," said Dr Ahn.
While enhancing the transparency of corporate management and governance are vital to ensure economic growth in the following year.
Despite the downturn in 2001 and the shocks of the terrorist attacks, the global economy will show strong signs of recovery over the following twelve months.
"APEC economies will be at the forefront of this global recovery."
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