UN report: New strategies needed for global economic growth
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WASHINGTON, Sept. 12, 2013- Developing and transition economies that are overly dependent on exports for growth need to rely more on domestic and regional demand, according to a United Nations report released Thursday.
In its review of trends in the global economy, the Trade and Development Report 2013 observed that world output growth, which had already slowed from 4.1 per cent in 2010 to 2.8 per cent in 2011 and then to 2.2 per cent in 2012, will not recover but might further decelerate to 2.1 per cent in 2013. Developed countries will continue to lag behind the world average, with only a one per cent increase in gross domestic product (GDP), reflecting the mix of a stable growth rate in Japan, a moderate deceleration in the United States and a further contraction in the Euro area."
Stimulus measures in the major developed economies have relied on expansionary monetary policies, but combined with fiscal austerity and continued subdued private demand, these policies have not succeeded in fostering credit creation, aggregate demand, and growth, according to the report. "With the effects of such responses fading away and the external economic environment showing few signs of improvement, these economies have found it increasingly difficult to avoid slowdowns," the report noted. "Reverting to pre-crisis growth strategies is no solution, either, according to the report, as these were built on unsustainable demand and financing patterns."
The UN report acknowledged that economic activity in most developed countries is still reeling under the impacts of the financial and economic crisis that started in 2008, including insufficient job creation, wage compression, and the still incomplete process of balance-sheet consolidation. However, continuing weak growth in several countries is also due to their current macroeconomic policy stance, it states.
In the United States, private domestic demand has begun to recover, partly owing to progress made in the consolidation of its banking sector, but cuts in public spending are having a “contractionary” effect, according to the report. Japan is bucking the current austerity trend by providing both strong fiscal stimulus and monetary expansion aimed at reviving economic growth and curbing deflationary trends.
Additionally, the UN notes that global trade expansion has virtually ground to a halt, with its volume increasing less than 2 per cent in 2012 and the first months of 2013.
The global trade collapse of 2008-2009 altered trade patterns in both developed and developing countries. Import and export volumes of developed regions have remained below their pre-crisis levels, with the exception of the United States, where exports have exceeded their previous peak of August 2008.
As developing countries have experienced faster economic growth than developed countries, they have seen a significant increase in their proportion to the global economy - their share in world output grew from 22 per cent in 2000 to 36 per cent in 2012, while their participation in world exports increased from 32 per cent to 45 per cent over the same period. Much of that increase resulted from the expansion of South-South trade, which the UN says must continue to be a part of developing countries' strategies.
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