The world economy is expected to grow by 2.3% in 2003, but growth could be threatened by a lengthy war in Iraq, according to The Conference Board of Canada’s latest World Outlook released today.

“On one hand, market indicators show the world economy to be growing at a faster pace than the 1.7% recorded in 2002, but geo-political instability — particularly over the price of oil — poses a negative risk,” said Kip Beckman, Principal Research Associate. “The situations in Iraq, North Korea, and Venezuela and the continued economic struggles of Japan and Germany could drag growth down.”

Concern about war with Iraq and the reduction of oil supply from Venezuela have pushed world oil prices well above US$30 per barrel. A relatively short war in Iraq lasting a couple of months, with a United States victory, would see prices fall quickly back to US$25 per barrel. A longer war of six months or more, or a less certain outcome, would leave prices at current levels for an indefinite period and could lead to much weaker economic performance.

Canada will be one of the world’s best performers this year with real GDP growth of about 3%. The United States economy is expected to grow by 2.5% in 2003, a slight rise from the 2.4% recorded in 2002.

South America is forecast to recover from its struggles in 2002, although the political and economic turmoil in Venezuela poses a threat to the entire region’s outlook.

The Asia-Pacific region, aside from Japan, is also expected to benefit from the recovery in the U.S. manufacturing sector. Europe will continue to exhibit weak growth of just 1% this year.