The outlook for the world economy is improving. The most recent World Economic Outlook, issued last week by the International Monetary Fund, forecasts 2.3 percent growth this year, and should climb to 3.4 percent in 2000. IMF First Deputy Managing Director Stanley Fischer opined earlier this week that "the global financial crisis is easing." Those are encouraging words, but caution remains important: The recovery is fragile and a reversal is still possible.
The chief problem is uneven growth. The United States economy continues its spectacular run, but there is growing concern over what appears to be a bubble in the stock market. If it bursts, U.S. demand would slow and there are no signs that Europe or Asia — Japan in particular — is prepared to pick up the slack.
The meeting of finance officials of the Group of Seven leading industrial countries, held earlier this week in Washington, echoed the IMF assessment and called on Japan to "use all available means to support strong domestic demand-led growth." That message has been repeated by officials at the IMF and within the U.S. government. Prime Minister Keizo Obuchi will hear it during his summit meeting with U.S. President Bill Clinton next week.