World economy is "teetering on brink" of downturn and will only grow
by 1.8 % this year: UN.
The world economy is ``teetering on the brink'' of a severe downturn
and will grow by only 1.8 percent in 2008, the United Nations said in
its midyear economic projections.
That's down from a global growth rate of 3.8 percent in 2007 _ and the
downturn is expected to continue in 2009 with only slightly higher
economic growth of 2.1 percent, the U.N. report said Thursday.
The midyear update of the U.N. World Economic Situation and Prospects
2008 blamed the downturn on further deterioration in the U.S. housing
and financial sectors in the first quarter which ``is expected to
continue to be a major drag for the world economy extending into
2009.''
But the U.N. said developing countries won't suffer as badly. They
should grow by 5 percent this year and 4.8 percent next year, compared
to a robust 7.3 percent in 2007.
The U.N. economists said the deepening credit crisis in major market
economies triggered by the U.S.-led slump in house prices, the
declining value of the U.S. dollar, persistent global imbalances, and
soaring oil and commodity prices ``all pose considerable risks to
economic growth'' in both developed and developing countries.
``The baseline forecast projects a pace for world economic growth of
1.8 percent in 2008,'' the U.N. report said.
But it said the final figure will largely depend on developments in
the United States.
Global growth this year could fall to 0.8 percent if the U.S. sub-
prime mortgage market turmoil has a more serious impact on developing
countries and countries in transition, the U.N. report said.
But if the monetary and fiscal measures the U.S. government has take
to stimulate the economy _ including tax refunds and lower interest
rates _ boost consumer spending and restore confidence in the business
and banking sector, the world economy would only slow to 2.8 percent
growth this year and 2.9 percent in 2009, it said.
The report, prepared by the U.N. Department of Economic and Social
Affairs, forecast that U.S. economic growth will decline from 2.2
percent in 2007 to -0.2 percent this year, with only slight recovery
in 2009 to 0.2 percent growth.
``At issue is how deep and long this contraction will be,'' the report
said. ``As the housing slump continues and the credit crisis deepens,
a broad array of ... indicators are already hinting at a recession.''
It cited a decline in U.S. employment, consumer confidence at its
lowest level in a decade, household spending growth slowing sharply,
and business equipment spending slowing alongside large inventories of
housing and a 30 percent decline in residential investment.
This strongly suggests ``that the implosion of housing activity will
not stabilize until 2009,'' the U.N. report said.
As for other developed countries, the U.N. forecast that Japan's
economic growth will decline from 2.1 percent in 2007 to 0.9 percent
in 2008, and that Western Europe's growth rate will drop from 2.6
percent last year to 1.1 percent this year.
Despite the slowdown in global economic growth in 2008, the U.N. said
global inflation is expected to accelerate this year to 3.7 percent.
The report said the recent sharp rise in commodity prices, and the
continued rise in oil prices are key factors spurring inflation along
with higher wages.
The growth of world trade also slowed from 7.2 percent in 2007 to 4.7
percent in early 2008, largely due to weak U.S. demand for imported
goods, it said.
The U.N. report said ``a number of developed countries with some
weight in the world economy like Japan, Germany, Switzerland, the
Netherlands, Norway and Canada, as well as the emerging-market
economies in East Asia and the main oil exporters have a decisive role
in engineering a more balanced and sustainable path of economic
growth.''
These countries ``have much to gain'' from deploying some of their
vast accumulated monetary reserves to improve infrastructure, social
services, and further diversify their domestic economies, it said.
No comments:
Post a Comment