UNITED NATIONS, Jan 25: The top economists predict that the global economy will continue to cool in 2006 — growing just slightly more than three per cent, following a similar pace in 2005 — even with the “dynamic growth” of China, India and a few other large developing economies, a United Nations report said on Tuesday.
Briefing the press in New York, Under-Secretary-General for Economic and Social Affairs José Antonio Ocampo highlighted above average economic growth in most parts of the developing world (5.6 per cent) and in transition economies (5.9 per cent). Growing at some 6.6 per cent, the least developed countries appear to be faring even better, reaching the fastest average growth rate they have had in decades, he added.
The flagship report — World Economic Situation and Prospects 2006 — was launched simultaneously on Tuesday in New York and Geneva, and was compiled by the Department of Economic and Social Affairs (DESA), the United Nations Conference on Trade and Development (UNCTAD) and the world body’s regional commissions.
Mr Ocampo told reporters that the slowdown was somewhat unsurprising, following several years of relatively high global economic growth. Rising deficits in the United States — still the world’s main engine for economic growth — sluggish growth throughout the European Union, and a modest rebound in the Japanese economy contrast with solid growth throughout the developing world, where much of the economic buoyancy resulted from high export commodities.
Pointing to some trouble spots, Mr Ocampo first noted lacklustre employment growth worldwide. The report adds that despite strong performance, many developing countries continue to face high levels of structural unemployment and underemployment, which limit the impact of growth on poverty reduction. Mr Ocampo said that there was also a risk of rising inflation, largely brought on by the sharp increase in oil prices.
He said that following the initial rise in oil prices, many countries adopted measures to protect domestic consumers by introducing or strengthening energy price controls and subsidies, and warned that these measures were becoming less and less viable, as high oil prices persist and more of the price increases would be passed on to consumers.
Robert Voss, Director of Development Policy and Analysis at DESA and the report’s main author, who joined Mr Ocampo at the briefing, said that the report called attention to global financial imbalances, driven largely by the United States $800 billion deficit and rising surpluses in other parts of the world, particularly the oil economies of Western Asia. To spur a correction in this imbalance, he echoed the report’s call for a synchronized, global approach to overcome “investment anaemia”.