The United Nations has released the World Economic Situation and Prospects 2019 report. It aims to offer timely warning about a range of macroeconomic challenges that policymakers face, in their efforts to deliver the ambitious targets of the 2030 Agenda for Sustainable Development. Fundamentally, urgent and concrete policy action is crucial for reducing the risks to the global economy and securing the foundations for stable, sustainable, dynamic and inclusive economic growth.
The sustainability of global economic growth is a cause of concern given the rising financial, social and environmental challenges. Global levels of public and private debt continue to rise, economic growth is failing to reach those who need it the most and the essential transition towards environmentally sustainable production and consumption is not occurring fast enough, amidst severe and widespread climate change.
While the global economic indicators remain favourable, a build-up in short-term risks, in the form of financial vulnerabilities, escalating trade disputes, financial volatility and undercurrents of geopolitical tensions, are threatening global growth prospects. Progressing towards a more flexible and responsive multilateral system entails being cognizant of these leading indicators of softening economic momentum across many countries in 2019. Also, several developed countries are facing capacity constraints that can possibly weigh down short-term growth.
In 2017 and 2018, economic growth accelerated in more than half of the world’s economies. Many developed countries have reached their economic potential, with a steady pace of expansion at 2.2%. Unemployment rates have dropped to historical lows and developing economies in South and East Asia are on a relatively strong growth trajectory amidst robust domestic demand.
In 2019 and 2020, global growth is expected to remain at 3%. However, this figure reflects the expansion of the global economy only on the surface level, while masking the confluence of uneven progress, underlying risks and balances that could exacerbate developmental challenges. Multiple signs indicate that global economic growth may have peaked.
Since the start of 2018, global industrial production and merchandise trade have been tapering, especially across trade-intensive capital and intermediate goods sectors. There has also been a severe decline in per capita incomes across several large developing countries. The strong per capita income growth in some countries is driven by core industrial and urban regions, while leaving behind the peripheral and rural areas.
The gradually recovering economic activity amongst commodity-exporting countries, especially fuel exporters, remains susceptible to volatile commodity prices, as the sharp drop in 2014-15 continues to weigh down on fiscal balances, leaving a legacy of higher levels of debts.
In 2019, further decline or weak per capita income growth is anticipated across Central, South and West Africa, Western Asia, Latin America and the Caribbean. These regions house nearly a quarter of the global population that is living in extreme poverty. More than half the world’s population lacks access to social protection. Such imbalances perpetuate high levels of subsistence activities, while pushing targets of eradicating poverty and jobs creation further from reach. Moreover, the inadequate income growth also poses risks to the achievement of the Sustainable Development Goals, as countries strive to alleviate infrastructure bottlenecks, improve health, upgrade human capital and broaden opportunities.
The resource-rich countries struggle to tap into their development potential. Many developing economies are falling behind due to their heavy dependence on commodities, in terms of export revenue and financing fiscal expenditure. The combination of high volatility of export and fiscal revenues often translates into large swings in economic activity and lower rates of long-term growth. Factors like weak governance, poor institutional quality and lack of diversification exacerbate these economic uncertainties and barricade socio-economic development. For many decades, many of the commodity-dependent growth laggards have also been embroiled in long-standing armed conflicts or civil unrest and instability.
In the report’s Foreword, António Guterres, Secretary-General of the United Nations highlights a critical overarching message. “While it is important to address the short-term challenges of today, policymakers must remain steadfast in advancing a long-term development strategy to meet the economic, social and environmental goals of tomorrow. Decisive policy action relies on multilateral, cooperative approaches in key areas such as pursuing climate action, mobilizing sustainable finance and redressing inequality.”
India Outbound
January 23, 2019
source https://indiaoutbound.org/the-world-economic-situation-and-prospects-2019/
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