World economy at risk of 2nd recession
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Xinhua, December 2, 2011
The global economy, troubled by many interconnected problems, risks entering another major downturn, according to a chapter of a report by the UN Department of Social and Economic Affairs (DESA) released Thursday.
The World Economic Situation and Prospects (WESP) report for 2012 will be released in full after the new year, but the global outlook section of the report, compiled by a group of UN economists, shows that 2012 will be essential to the future of the global economy.
"The situation in the world is rather grim," Jomo Kwame Sundaram, UN assistant secretary-general for economic development with the DESA, said at a press conference here. "We have a situation where we may well be at risk of a double dip. In any case, it is very likely that there will be further slowdown."
Sundaram, along with Rob Vos, director of development policy and analysis for DESA, briefed journalists here Thursday on the report and its implications. The WESP report, released annually, outlines three possible projected scenarios for the global economy: a baseline projection, as well as optimistic and pessimistic projections.
Sundaram said the world economy following the pessimistic route is "increasingly likely" for several reasons.
"Most importantly from the United Nations perspective, we have a situation where through collective action as well as inaction, the situation is likely to deteriorate further," he said.
Developing countries are still projected to be the growth engines for the world economy in the coming years. The WESP report estimates their economies to grow by 5.4 percent in 2012 and 5.8 percent in 2013.
However, according to WESP, these estimates represent a slowdown in the growth of developing economies. In 2010, these economies grew by 7.1 percent. The DESA officials said a major reason for this change is the problematic economic situation that pervades in many developed nations.
"As you know for the last three decades or so the developing world has been much more externally oriented, much more dependent on exports than ever before and now the prospects for exports have been diminished," said Sudaram. "As a consequence, we are likely to see rather adverse conditions emerging in the developing world as well."
High unemployment, particularly in developed countries, is having a negative impact on the global economy, said the WESP report.
In the baseline scenario, Vos said, "the jobs deficit that we estimate for 2011, caused by the global crisis of 2008 and 2009, at 64 million jobs, won't be recovered, maybe not even before 2016, if the global economy continues growth at this pace."
Developed countries are averaging an 8.3 percent unemployment rate in 2011, and WESP predicts that unemployment levels will not return to pre-crisis numbers until well after 2015.
The WESP report places part of the blame for the current economic climate on fiscal austerity measures that have been passed in response to high public debt in developed countries.
The report suggests additional fiscal stimulus, an idea that runs counter to the current pattern of thinking in the governments of many developed countries.
"If there's no more fiscal stimulus there's no other factor that will keep up the demand, particularly in developed countries, " he said, adding that without stimulus, unemployment may grow and economic growth may decrease, which would only make national debt problems worse.
The report calls on countries to better coordinate and collaborate in terms of their responses to global economic problems. Sundaram said the recent G20 summit in Cannes, France, did not deliver enough results in this regard.
"The most important commitments which were hoped for did not materialize," he said. "We do not have a strong collective action at the global level to address the problems, which we face in the world, and particularly in Europe. As a consequence thereof, we do not have the basis for a strong recovery in the developed world and what is likely to happen in the near future is a further deterioration of conditions in the developing world."
