A United Nations report finds that high trade tensions and policy uncertainty continues to damage the prospects for global economic growth.
In the mid-year update of its World Economic Situation and Prospects Report first released in January this year, the UN’s Department of Economic and Social Affairs forecasts as global growth slowdown to 2.7% in 2019, down from 3% growth experienced in 2018.
The unresolved trade tensions – most notably between the United States and China; high international policy uncertainty and a softening of business confidence is all leading to the global slowdown as the Assistant Secretary General for the UN’s Department of Economic and Social Affairs Elliot Harris explains.
“The overarching message is that the unresolved trade tensions that we’ve experienced and the high international policy uncertainty continue to damage the prospects for economic growth going forward. Since the release of the WESP in January of 2019, the growth forecasts for 2019 have been downgraded in most developed economies and in several developing regions, particularly in southern Africa, in Western Asia and Latin America and the Caribbean.”
Increased geo-political uncertainty, waning stimulus measures in the developed world and weather-related shocks like the Cyclones to hit southern Africa are also having a negative impact. Dawn Holland – an Economist and the Chief of Global Economic Monitoring in DESA says
“The slowdown in growth that we’ve seen also reflects factors such as the waning effects of fiscal stimulus measures in the United States, some disruption in the automobile sector in Europe and also factors such as power shortages in South Africa and oil production cuts by OPEC and other oil producers. In aggregate, we are forecasting that economic growth this year will slow to 2.7% compared to growth of 3% that we saw last year.”
The downturn is most concerning to Sustainable Development prospects, particularly the 2030 agenda and highlights an urgent need to strengthen multilateralism and addressing the gaps in development financing. The report calls for more well-targeted policy responses, improving national fiscal management and for countries to increasingly look beyond GDP growth and identify new measures of economic performance that reflects the costs of inequality, of insecurity and of climate change. Elliot Harris explains further.
“In light of severe environment degradation, a swift and radical transition away from fossil fuels is absolutely imperative. This will require a fundamental change in economic decision-making and in private consumption behaviour. To accelerate this process governments have several policy options – one crucial instrument in this regard is carbon pricing. The objective behind carbon pricing is to fix a fundamental flaw in the current economic system namely that the emitters of greenhouse gases currently do not have to consider the wider costs of emissions. By contract, by putting a price on carbon dioxide, we would make producers and consumers internalise these negative consequences.”
The report also points to deep structural weakness in several large developing countries like South Africa that are struggling to recover from recessions or remain trapped on a low growth path.