• Global GDP growth will slow from 5.1 per cent in 2004 to 4.2 per cent in 2005; world trade growth will slow from 9.1 per cent to 6.3 per cent.• The oil price is expected to remain above $50 a barrel, although in real terms it is well below the highs of the early 1980s.• Nearly 25 per cent of the deterioration of the US current account since 1997 can be attributed to net trade in petroleum products, and reflects the oil price.• A 10 per cent revaluation of the Chinese renminbi would have little impact on the US current account deficit.• Rapid real house price growth will continue to support US housing investment in 2005 and 2006.
The US current account deficit: A fundamentally flawed development?