The world economy’s emergence from a two-year period of sub-par growth continues to be impeded by a high degree of uncertainty, which is weighing on financial markets and dampening consumer, business and investor confidence, say TD economists in the latest issue of the TD Global Economic Outlook.

“Global economic growth will expand by just 3.1% this year – up from last year’s lacklustre 2.6%, but still below its 20-year average — and not accelerate to 3.7% until 2004,” said Gillian Manning, U.S. and International Economist at TD Bank Financial Group. “However, even this respectable performance overall will owe much to continued strong growth in non-Japan Asia – and especially China, which accounts for a sizeable share of the world economy on a purchasing power parity basis.”

Elsewhere, significant pockets of weakness persist — from South America, where several economies are coming off their worst performance since the 1980s, to Japan, which has yet to come to grips with the structural problems that dogged it through the 1990s, to continental Europe, where growth remains sluggish.

TD says weak domestic demand continues to weigh on economic growth in the euro-zone, which expanded by less than 1% last year – its worst performance since the 1993 recession. “The euro-zone’s largest economies are attempting to emerge from an economic downturn with little or no support from monetary and fiscal authorities,” Manning said. “This will keep the recovery very muted, with real GDP growth reaching just 1.5% in 2003 and rising back to its trend rate of around 2.2% only in 2004.”

An accommodative policy environment is helping to support economic growth in Canada and the United States. Just weeks ahead of the March 2003 update to the TD Quarterly Economic Forecast, “We see no reason to change our view that the Canadian and U.S. economies will outperform the rest of the G7 this year and next,” added Manning.

Moreover, with very little excess slack left in the Canadian economy, the Bank of Canada is set to resume raising rates in the near future — another factor that distinguishes Canada from its G7 partners, where rates are likely to remain on hold for the foreseeable future.

The TD Global Economic Outlook (including charts and detailed tables), is available in PDF format on TD Economics’ home page at: www.td.com/economics.