Global Economic Prospects: Surviving A Mild Case Of Stagflation

Economic growth has recently slowed across much of the world economy following stronger-than-expected performance during the first quarter of 2008. The net result is likely to be that on a year-over year basis, global real GDP growth for 2008 will be only slightly below the 3.8 percent forecast last April. For 2009, however, growth now looks likely to decelerate to slightly below 3.5 percent rather than accelerate to 4 percent. Meanwhile, the broad upsurge in commodity prices of earlier this year has been largely if not completely reversed. In particular, the price for light sweet crude has fallen back from a peak of almost $150 per barrel to about $100 per barrel but is still above the $80 per barrel price of late 2007.