The world economy is on the brink of another major downturn, according to a just released United Nations report, “World Economic Situation and Prospects 2012”.
“Global economic growth started to decelerate on a broad front in mid-2011 and is estimated to have averaged 2.8 per cent over the last year. This economic slowdown is expected to continue into 2012 and 2013. The United Nations baseline forecast for the growth of world gross product (WGP) is 2.6 per cent for 2012 and 3.2 per cent for 2013, which is below the pre-crisis pace of global growth,” the report said.
The report said that persistent high unemployment in the United States and low wage growth are holding back aggregate demand and, together with the prospect of prolonged depressed housing prices, this has heightened risks of a new wave of home foreclosures. It said growth in the eurozone has slowed considerably since the beginning of 2011 and the ever-simmering sovereign debt crisis heavily weighs on consumer and business confidence across Europe.
“The failure of policymakers in developed countries to address unemployment and prevent sovereign debt distress and financial sector fragility from escalating has posed the most acute risk for the global economy in the outlook for 2012-2013, with renewed global recession being a distinct possibility,” the UN said.
Meanwhile, developing countries and economies in transition are expected to continue to stoke the engine of the world economy, growing on average by 5.4 per cent in 2012 and 5.8 per cent in 2013 in the baseline outlook. Among the major developing countries, growth in China and India is expected to remain robust. GDP growth in China slowed from 10.3 per cent in 2010 to 9.3 per cent in 2011 and is projected to further slow to below nine per cent in 2012-2013. India’s economy is expected to expand by between 7.7 and 7.9 per cent in 2012-2013, down from 8.5 per cent in 2010. The report added: “Low-income countries have experienced only a mild slowdown. In per capita terms, income growth slowed from 3.8 per cent in 2010 to 3.5 per cent in 2011 and, despite the global downturn, the poorer countries may see average income growth at or slightly above this rate in 2012 and 2013. The same holds for average growth among the United Nations category of least developed countries (LDCs)”.
Against this background, the report discusses several policy directions which could avoid a double-dip recession, including optimal design of fiscal policies to stimulate more direct job creation and investment in infrastructure, energy efficiency and sustainable energy supply, and food security; stronger financial safety nets; better coordination between fiscal and monetary policies; and the provision of sufficient support to developing countries in addressing the fallout from the crisis and the coordination of policy measures at the international level. The World Economic Situation and Prospects is a joint product of the Department of Economic and Social Affairs, the United Nations Conference on Trade and Development and the five United Nations regional commissions. It provides an overview of recent global economic performance and short-term prospects for the world economy and of some key global economic policy and development issues.
One of its purposes is to serve as a point of reference for discussions on economic, social and related issues taking place in various United Nations entities during the year.