Led by India and China, the economies of South and East Asia will grow at an average of about 6.25 per cent in 2004, according to a United Nations report.

The report added that this would be the fastest regional growth in the world. It also said global economic growth would accelerate to 3.5 per cent during the year but employment generation would continue to be a problem.

Spurred by low interest rates, stimulative fiscal measures in the United States and the rapid rise of China as a major importer and exporter, the world economy would grow 3.5 per cent, it said in its report -- World Economic Situation and Prospects 2004.

However, unless the recovery was nurtured, it was likely to be reversed, the report warned. Recovery still depended on low interest rates and expansionary fiscal measures, so policymakers should be careful not to choke the recovery or prospects for needed job growth through a premature withdrawal of stimuli or precipitated tightening, UN Under-Secretary-General for Economic and Social Affairs Jose Antonio Ocampo said.

Continued and growing international imbalances, manifested in the large US external deficit and matching surpluses in a handful of other economies also pose a serious threat. Realignment of exchange rates or imposition of protectionist measures was, however, not the way to address the imbalances, the report said.

Coordinated policy actions to narrow structural growth differentials among major economies, as well as international cooperation to facilitate sustained growth in developing countries and thereby improving overall demand would be a preferable route, it said.

In particular, United Nations economists see the need for the US to reduce its government deficit and Europe and Japan to take measures to boost long-term growth.

Sustained high level of economic growth seen during the 1990s is unlikely to be repeated. While global trade is projected to grow 7 per cent this year, it is unlikely that the buoyancy of pre-2000 years will be repeated, especially given setbacks in the Doha round of WTO trade negotiations.

Foreign direct investment of $660 billion in each of the last two years is less than half of the peak level achieved in 2000, and its recovery, as well as that of other international capital flows, is expected to subdue.

Moreover, the dampening effects of geopolitical tensions and threats of international terrorism are more prevalent now than immediately before 2001.

On employment, the report said job growth was hampered largely by domestic cyclical factors, as well as the need for structural reforms in some countries, rather than by the transfer of employment to developing countries.

Also, since employment always lagged the other aspects of a recovery, it would continue to be a problem for some more time.

Global recovery

• World economy to grow at 3.5 per cent in 2004.
• Global trade projected to grow 7 per cent.
• Employment to remain a problem.
• Coordinated policy actions that will narrow structural growth differentials among major economies to help.