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PARIS, Wednesday (AFP) The global economy, having failed to sustain an uptick in momentum in the second quarter of 2002, is unlikely to catch fire in the early part of 2003, clouded by fears of war and higher energy costs. The tepid, US-led recovery seen last spring, powered by an inventory build-up, eventually ran out of steam.

Shaken by stock market slides and a wave of corporate accounting scandals, companies sought to reduce capacity, even though consumer spending - notably in the United States - remained healthy.

While the US economy, sustained by federal spending, interest rate reductions and its ever-faithful consumers, managed to weather the storm, the going was considerably rougher in Europe - and particularly in Germany, the euro-zone's leading economic power. Looking ahead to 2003, Morgan Stanley strategist Barton Biggs acknowledged that "I have no idea what the coming year will be like."

"A year ago, my essay was titled 'Not out of the woods yet.' This year, my one-liner would be: "still not out of the woods yet, but there could be a clearing ahead.'"

Added Stephen Roach, Morgan Stanley chief economist: "Our first look at the world ... points to a gradual improvement in the pace of global growth following two years of recession-like outcomes in 2001-2002 and an anemic recovery expected in 2003."

But at investment bank Merrill Lynch economist David Rosenberg warned that "with a war looming on the horizon, OPEC (the Organization of Petroleum Exporting Countries) moving to curb production and the strike in Venezuela disrupting (oil) supply, energy costs will likely remain an income-drain."

He said that in the United States there were no firm indications that growth next year would be solid. Rosenberg predicted an expansion in gross domestic product of 2.6 percent.

Somewhat more reassuring were comments last week from US Federal Reserve Chairman Alan Greenspan, who said the US economy "has been working its way through a soft patch."

Prospects in the 12-nation euro zone meanwhile appear to be bound up with those of the United States. "A rebound in the United States and global demand is necessary to kick-start the euro-zone recovery," said Bank of America chief European economist Lorenzo Codogno, who foresees euro-zone growth next year of only 1.3 percent.

In Asia, long-suffering Japan should turn in a better than expected performance in its 2002-2003 fiscal year than in years past. The government is looking for growth of 0.9 percent.

But some forecasts also see Japanese momentum slipping back in 2003 to a rate of 0.6 percent. China should see its economy expand 7.3-7.5 percent in 2003, according to December estimates from Consensus Economic Forecast, which put growth at 5.9 percent in India next year and 5.1 percent in South Korea.

"Despite the weaker-than-expected economic performance of the United States and other industrial countries, developing Asia's economic recovery remains intact and will continue to strengthen in 2002-2003," predicted the Asian Development Bank.

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