High oil prices will dampen, but not derail, world economic growth in 2005, according to a new report from The Conference Board of Canada.

“The global economy has so far handled higher oil prices without major economic disruption, said Kip Beckman, principal research associate, in a release. “Strong corporate profits, the rise of the global service industry and quick actions by central banks are cushioning the impact. But if oil prices remain above US$55 per barrel for an extended period, GDP growth will weaken further, although a global recession is unlikely.”

After expanding by almost 4% in 2004, the world economy is expected to post real gross domestic product (GDP) growth of 3% this year, led by the United States and China. The Chinese economy expanded by almost 10% in 2004 and its government is attempting to ease the pace of growth. Still, China’s economy is expected to average 8% growth over the next two years.

U.S. growth will weaken from 4.4% in 2004 to 3.2% in 2005, due largely to rising interest rates. In contrast, grim prospects for Japan and Germany are holding back the global outlook. Both countries are expected to post real GDP growth of about 1% in 2005.