2004 was a record for developing country growth, but activity began to slow in the second
half and this slowing trend is expected to continue through 2007.
imbalances, exchange rates and inflation
Higher U.S. interest rates should reverse the upward trend in the current account and
prevent a disorderly decline in the dollar. Slower growth should help moderate
incipient inflationary pressure, especially among developing countries.
Trade flows are expected to remain high, but slower growth will slow the pace of export
and import volume growth during 2005-07.
Strong demand from developing countries is expected to keep oil and metals prices high
during 2005, but these are expected to begin moderating in 2006 and 2007.
and policy priorities
Exchange rate uncertainty could result in a sharp increase in interest rates or a
significant misalignment of currencies, even provoking a global recession. At the
same time slower growth could slow trade liberalization or even increase protectionism to
the detriment of developing countries.