The world economy will grow a strong 3.7 per cent this year, UN forecasters predicted, but warned Washington that soaring US budget and trade deficits were not sustainable.
The latest forecast from the UN Department of Economic and Social Affairs, following 2.6-per cent global growth in 2003, provided fresh evidence that the economy was still picking up after a multiyear slowdown.
The US economy, the world's largest and a crucial driver of global growth, was expected to expand 4.7 per cent in 2004 compared to 3.1 per cent in 2003, according to the new report.
But it questioned the continuing ability of the United States to serve as the locomotive of world economic growth due to its soaring budget deficits and yawning trade gap.
While US deficit spending and Americans' strong appetite for imported goods stimulate growth both domestically and around the world, continued US expansion will depend largely on the willingness of the rest of the world to keep buying US Treasury bonds, it said.
"Such a cycle of interdependency... is unlikely to prove sustainable," the report warned.
Economist and Nobel laureate Lawrence Klein said US President George W. Bush appeared to be making the same mistake in Iraq as former President Lyndon Johnson made during the war in Vietnam that began for the United States four decades ago.
Securing and then rebuilding Iraq will be costly and take a long time. Yet Mr Bush - like Mr Johnson in Vietnam - appears intent on not paying while events are unfolding, Mr Klein told a news conference at UN headquarters.
When Washington finally did pay back what it had borrowed for Vietnam, the effects on the economy were felt for a decade, in the form of recession and inflationary pressures, he said.
"It will catch up to you," he warned. Elsewhere in the world, the UN report saw Japan's long-stagnant economy expanding at a 3.1-per cent clip this year but tapering off to two per cent next year.
After years of virtual stagnation, "Japan seems on track to a sustainable growth path of around three per cent, which is remarkable," University of Toronto economist Peter Pauly said.
Europe would grow at a tepid 1.9-per cent rate this year, rising to 2.4 per cent in 2005, the UN report predicted.
Developing countries are expected to see 5.1 per cent growth in 2004, rising to 5.3 per cent next year, while transitional economies including Russia's are seen growing six per cent this year before dipping to 5.7 per cent in 2005.
The economy of China, a regional leader becoming increasingly important in the world picture, is expected to grow at an impressive 8.5 per cent rate this year, followed by 8.2-per cent growth next year, the UN forecasters said.
Conditions favourable to growth - low interest rates, low inflation, rising stock markets, expanding trade and foreign investment - "are almost ubiquitous," their report said.
For central banks, with inflation widely expected to resurface this year after a long period of relatively stable prices, "the trick will be to hold interest rates down to allow the recovery to extend and deepen, while standing ready to tighten monetary policy before inflation or overheating goes too far," the UN forecasters said.
Overall, however, "inflation is not an issue at the present time," Mr Klein said.