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Fri 1 Jun 2007 12:00 AM

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Global economic outlook positive, for now

Hotel investors should not be lulled into a false sense of security despite the positive global economic outlook for the next few years, industry experts have warned.

Hotel investors should not be lulled into a false sense of security despite the positive global economic outlook for the next few years, industry experts have warned.

The analysis came as part of the Arabian Hotel Investment Conference held in Dubai in April.

Morgan Stanley chief economist Stephen Roach said the baseline outlook was "very optimistic", with a 4.9% growth in GDP predicted for 2007 after "six years of the strongest growth in modern history of world economics".

Roach said the positive economic outlook was made possible by a commitment to globalisation - a "win-win", as he explained, because it allowed the developing world to double its global labour supply, and allowed the developing world to explore new export markets and greater purchasing power.

But the globalisation trend was causing some angst in developed countries such as America, because while it increased profits for corporations, it decreased the profit share for those supplying the labour, typically the middle and lower classes, Roach explained.

"There is a widening disparity in the gap between the ‘haves' and ‘have-nots'," Roach said.

"As the pendulum of economic power has swung from labour to capital, now the [political] power will swing to the left."

Roach said an example of this power shift could be seen in the number of laws moved in the US Congress to ‘protect' workers from cheaper Chinese imports and labour - with 27 bills lodged between 2005 and 2006, there were already 12 lodged for 2007 to 2008.

Roach added that a move away from globalisation, through measures such as protective legislation, could result in trade frictions, rising inflation, rising interest rates and a weaker dollar.

"There is a lot of talk that the [international economic] community has developed immunity to the United States, but that has not been tested," he concluded.

"This will have major implications for the rest of the world."

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