Global Recession End Not In 02: Smadja

The world economy is not likely to come out of recession in the current calendar year, senior advisor at the World Economic Forum, Claude Smadja, said at a session on global economic outlook for 2002 at the CII's ongoing Partnership Summit here.

However, he said, India can take advantage of the current economic situation if the country gives attention to the development of human capital, he said.

"If the Indian government can demonstrate at the international level that it is serious about sustainable growth in future, it could get international attention," Smadja said.

He emphasised that what is working to India's disadvantage is that the country is mid-way in reforms process and there is a lot of confusion in this regard.

While the United States is not likely to see growth of more than 1 per cent, east Asian countries would see a growth of around 5 per cent in the coming fiscal.

"All east Asian countries can help stimulate the economy. They are likely to record a higher growth rate mainly because they have managed fiscal in such a way that they have very low interest rate. They also have very flexible monetary policies," Smadja said.

Commenting on the recovery of the United States economy from the recession, Smadja said, "The United States will see a very gradual incremental recovery, contrary to what people think, Europe is not likely to benefit from the situation since it is one of the most affected by the recession."

Germany and France, which are the powerhouses of Europe, will see a growth of only 1 per cent in 2002. Europe's economic condition is likely to aggravate further due to the tension and confusion regarding the new currency euro.

"Though there is a lot of euphoria surrounding the euro, the fact is that it hasn't passed the credibility test. European economy will be crawling in 2002," Smadja said.

China, on the other hand, is likely to see a very volatile mix, this year, he believes. "The country will see acceleration of reforms in the wake of its entry into the World Trade Organisation and it will also be a year of major political activity.

"However, China will exert margin pressure not only for low value and middle value products but on high value products as well," Smadja said.