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 May 27, 2003
End To Iraq War Improves Business View Of Prospects

 The end of the Iraq war brought a slight boost to business expectations for the world economy over the next half year, a global survey of over 1,000 business experts disclosed May 27. Bu the overall business climate - combining assessments of the current situation with those for the next six months - remains gloomy, overshadowed by continuing Middle East tensions and the SARS epidemic.

Unemployment is seen as the biggest economic problem, followed by the related issue of insufficient demand, the quarterly survey by the International Chamber of Commerce and the Munich-based Ifo economic research institute reported.

The ICC/Ifo panel set the business climate indicator at 83.2. This is marginally worse than the previous 85.9 and well below the long-term average of 94.1 between 1982 and 2002.

Other indicators were also down on the previous quarter. The indicator for the current situation stood at 67.6, compared with 69.4 at the end of February, while expectations for the next six months were less confident at 98.2, down from 101.8.

Dr. Gernot Nerb, Ifo's Director of Business Surveys, said: " Nearly half the responses came in before the fall of Baghdad on 8 April, but replies received after the Saddam Hussein regime collapsed were comparatively more hopeful about the immediate outlook."

Ifo analysts said that that, alongside Middle East tensions, the SARS epidemic had created "waves of anxiety" in the business community, especially in the Asian region.

"The economic climate in the second half of the year will greatly depend on the progress of peaceful conflict resolution in the Middle East and whether the spread of SARS can be stopped," they said.

A regional breakdown showed that the overall economic climate worsened particularly in Asia, where the impact of the SARS epidemic was strongest. In Europe it was stable but low, and in North America the indicate was somewhat weaker.

Other highlights

* On a worldwide scale, consumer price inflation in 2003 is expected to be 3.2%, the same as the January survey. Inflation is seen as under control in most countries.

* The euro is seen as somewhat overvalued - a perception that has probably grown since the April survey was conducted.

* The phase of falling short-term interest rate cuts is nearing its end. Long-term interest rates are seen as increasing marginally in the course of the next six momths.