The World Economy

Extract

In 2006, global output, measured in terms of purchasing power parities, expanded by 5.4 per cent, the fastest rate of growth since 1973. Despite a higher oil price and the recent rise in global long-term interest rates, we expect world growth to remain above 5 per cent this year, with a slowdown in the US offset by the rapidly expanding China and stable growth in the EU and Japan. In this issue we explore the widening divergence between the return on investment and real interest rates in the major economies. This suggests that despite the recent rise in long real rates it remains profitable for firms to invest in many countries.