World Economic Outlook Improves While U.S. Trade Deficit Soars

The Bundesbank said May 20 that the world economic growth outlook has brightened in recent months, and the risk of a global recession has taken a back seat to other concerns. World economic growth will slow somewhat this year to around 2.25%, but will accelerate to 3.5% in 2000, the German central bank said in its May monthly report. Caution was included in the message, though: "The burgeoning growth optimism must not obscure the fact that it is still too early to sound the 'all clear.' The potential for a set-back is still considerable," the report said. Countries hit earlier by financial crises should continue to overhaul and modernize their economies, and European countries should continue to apply structural reforms as well, it continued. Concerning Europe, the bank said that although the euro zone's exports in the first months of the year were burdened by the long-term consequences of world economic crises, there were signs the export slowdown has bottomed. A slight recovery in the near future is possible, the Bundesbank said. Meanwhile, the indefatigable U.S. economy saw its trade deficit climb to a record high for the third consecutive month in March as rising oil prices and strong demand for foreign cars pushed imports to a record. The Commerce Department said that the U.S. goods and services trade gap widened to $19.7 billion in March from a revised $19.1 billion in February. The March deficit was well above the $18.4 billion shortfall that economists were expecting. For the first quarter of 1999, the U.S. trade deficit totaled $55.7 billion, a 57% increase compared with a year ago. Economists say that the buoyant U.S. economy continues to pull in imports at a record pace while demand for U.S. goods and services in many parts of the world remains sluggish.

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