Robert
Vos, Director of the Development Policy and Analysis Division of the UN
Department of Economic and Social Affairs at the launch of the World
Economic Situation and Prospects 2013 report. UN
18 December 2012 – World economic growth has weakened considerably
during 2012 and is expected to remain subdued in the coming two years,
says a new United Nations report, which calls for policy changes to spur
growth and tackle the jobs crisis.
The World Economic Situation and Prospects 2013, the first
chapter of which was published today by the UN Department of Economic
and Social Affairs (DESA), states that the global economy is expected to
grow at 2.4 per cent in 2013 and 3.2 per cent in 2014 – a significant
downgrade from the UN’s forecast of half a year ago.
“This pace of growth will be far from sufficient to overcome the
continued jobs crisis that many countries are still facing,” said a news release
on the report. “With existing policies and growth trends, it may take
at least another five years for Europe and the United States to make up
for the job losses caused by the Great Recession of 2008-2009.”
Noting that weaknesses in the major developed economies are at the root
of the global economic slowdown, the report stresses that most of them,
but particularly those in Europe, are trapped in a “vicious cycle of
high unemployment, financial sector fragility, heightened sovereign
risks, fiscal austerity and low growth.”
Several European economies and the euro zone as a whole are already in
recession, and euro zone unemployment increased further to a record high
of almost 12 per cent this year. Also, the US economy slowed
significantly during 2012 and growth is expected to remain “meagre” at
1.7 per cent in 2013. Deflationary conditions continue to prevail in
Japan.
The economic woes in Europe, Japan and the US are spilling over to
developing countries through weaker demand for their exports and
heightened volatility in capital flows and commodity prices.
“A worsening of the euro area crisis, the ‘fiscal cliff’ in the United
States and a hard landing in China could cause a new global recession.
Each of these risks could cause global output losses of between 1 and 3
per cent,” warned Rob Vos, Director of DESA’s Development Policy and
Analysis Division and team leader for the report.
Stating that present policies fall short of what is needed, the report
calls for changing course in fiscal policy and a shift in focus from
short-term consolidation to robust economic growth with medium to
long-term fiscal sustainability.
It also recommends avoiding premature fiscal austerity, while noting
that the reorientation of fiscal policies should be coordinated globally
and aligned with structural policies that support direct job creation
and green growth. In addition, it recommends that monetary policies be
better coordinated globally and regulatory reforms of financial sectors
be accelerated to stem exchange rate and capital flow volatility, which
pose risks to the economic prospects of developing countries.
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