United Nations Presents Grim Prognosis on World Economy

nytimes.com | Dec 18, 2012


World economic growth has weakened substantially this year and faces the confluence of a triple threat — the fiscal cliff in the United States, a worsening European debt crisis and a sharp slowdown in China, the United Nations said in a year-end 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 principal author of the report, Robert Vos, director of the Development Policy and Analysis Division of the United Nations Department of Economic and Social Affairs, said the trends meant it could take until at least 2017 just to recoup the jobs lost in the United States and Europe since the 2008-2009 global recession.

He forecast the pace of 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, weaker than 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 told a news conference at the 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, titled “World Economic Situation and Prospects 2013.” He said the forecast pace of growth “will be 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 major 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 litany of maladies, including record unemployment in Europe, a decline in global trade, volatility in the international flows of capital and low food stocks in many poorer countries that have made prices in those countries unpredictable. “Even minor supply shocks may cause new prices hikes and shortages,” she said.

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 year-end spending cuts, the so-called fiscal cliff, they erred on the side of assuming the worst. Both said the international economic shock of such spending cuts would reverberate quickly, further weakening 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. That is reason for some concern,” Mr. Vos said.

He criticized the focus in developed countries on austerity, budget cutting and a reduction in aid to the developing world. “Fiscal austerity in donor countries is not only detrimental to their own economic recovery, but certainly should not come at the expense of the development efforts of the poorest nations,” he wrote in a summary of the report.

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

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

Nonetheless, he said, Africa remains plagued by armed conflicts and other “numerous challenges,” and the strong growth rates will not hasten the end of the continent’s widespread poverty.


2 responses to “United Nations Presents Grim Prognosis on World Economy

  1. Pingback: United Nations Presents Grim Prognosis on World Economy « infowarsusa

  2. Pingback: Global economy risks falling into renewed recession, warns UN report « myglobalcommunitytoday

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