Sound The Trumpet : UN Presents Grim Prognosis on the World Economy

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“UN Presents Grim Prognosis on the World Economy”
by The New York Times - BRICK GLADSTONE
December 19th, 2012

World economic growth has weakened substantially this year and faces the confluence of a triple threat — the so-called fiscal cliff in the United States, the European debt crisis and a sharp slowdown in China, the United Nations said in a report released on Tuesday. The worst case, the report said, could be a new global recession that mires many countries in a cycle of austerity and unemployment for years.

The report’s main author, Robert Vos, director of the Development Policy and Analysis Division of the United Nations Department of Economic and Social Affairs, said it could take until at least 2017 just to recoup the jobs lost in the United States and Europe since the 2008-9 recession.

He forecast world growth for 2013 at 2.4 percent, “a significant downgrade” from the United Nations’ midyear forecast of 3.1 percent. He said the 2012 growth rate was 2.2 percent, versus the midyear forecast of 2.5 percent.

“I’m afraid this time around we’re not very optimistic about how things are moving,” Mr. Vos said at a news conference at United Nations headquarters.

“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,” Mr. Vos said in the report, “World Economic Situation and Prospects 2013.” He said the forecast growth was “far from sufficient to overcome the continued jobs crisis that many countries are still facing.”

The report’s proposals to avoid that outcome — more government programs that focus on job growth, fiscal coordination and aid to developing countries — are not likely to be widely embraced by policy makers in the United States and Europe, where the preoccupation is on budget cuts and spending discipline. Still, the report provides one of the most complete assessments of the world’s economic trends and reflects what United Nations experts view as the most pressing areas of concern.

Shamshad Akhtar, assistant secretary general for economic development, who introduced Mr. Vos’s report, began by reciting a list of maladies, including record unemployment in Europe, a decline in global trade, volatility in the flows of capital and low food stocks in many poorer countries that have made prices in those countries unpredictable.

While she and Mr. Vos acknowledged the news reports on progress in the debt-reduction negotiations between the White House and Congressional Republicans to avoid dire automatic tax increases and spending cuts that would take effect in January, what has been called the fiscal cliff, they erred on the side of assuming the worst. Both said the shock of those drastic fiscal changes would further weaken economies elsewhere.

“Even if we don’t get to the fiscal cliff, what’s on the table now is not too far from what would happen if the United States goes over the cliff,” Mr. Vos said. “That is reason for some concern.”

He criticized the focus in developed countries on austerity, calling it “detrimental to their own economic recovery,” and said cuts “should not come at the expense of the development efforts of the poorest nations.”

During the economic crisis four years ago, China helped to cushion the impact with huge doses of stimulus spending, but there is no single savior this time. If China’s growth rate of 7.5 percent this year slows to 5 percent or less, Mr. Vos said, “that would have major global ramifications.”

He said growth rates in 2012 fell sharply almost everywhere except Africa, where economies grew in the 5 percent to 6 percent range, helped by strength in oil-exporting countries, spending on basic infrastructure improvements and expanding ties with Asian economies.

But he said Africa remains plagued by armed conflicts and many other challenges, and the strong growth will not hasten the end of the continent’s poverty.

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