Economy

Persistently high interest rates, debt sustainability challenges, continuing geopolitical tensions, and increasing extreme weather events pose significant downside risks. Following is a press release from the UN Department of Economic and Social Affairs.

New York, 16 May, 2024 – Global economic prospects have improved since January, with major economies avoiding a severe downturn, bringing down inflation without increasing unemployment, according to the World Economic Situation and Prospects as of mid-2024 released today. However, the outlook is only cautiously optimistic. Higher-for-longer interest rates, debt sustainability challenges, continuing geopolitical tensions and ever-worsening climate risks continue to pose challenges to growth, threatening decades of development gains, especially for least developed countries and small island developing States.

According to the report, the world economy is now projected to grow by 2.7 per cent in 2024 (+0.3 percentage points from the January forecast) and 2.8 per cent in 2025 (+0.1 percentage points from the January forecast)the January forecast). The upward revisions mainly reflect a better outlook in the United States, where the latest forecast points to 2.3 per cent growth in 2024, and several large emerging economies, notably Brazil, India and the Russian Federation. The outlook for China registers a small uptick with growth now expected to be 4.8 per cent in 2024.  On the other hand, the economic outlook for Africa has deteriorated since the last release, with expected growth lowered by 0.2 percentage points for 2024, threatening adverse impacts for many of the world’s poor. On average, global growth in the coming years is expected to remain below the average of 3.2 per cent during 2010–2019.

Economic environment remains fragile for small island developing States. Economic prospects for small island developing States (SIDS) are projected to improve, with GDP growth increasing from 2.4 per cent in 2023 to 3.3 per cent in 2024, primarily driven by a sustained rebound in tourism. However, SIDS remain vulnerable to spikes in international commodity prices due to their high import dependency on essential goods. Frequent extreme weather events and high public debt also pose significant challenges.

“The SIDS outlook for 2024 is promising, but we mustn’t get complacent,” said Li Junhua, United Nations Under-Secretary-General for Economic and Social Affairs and Secretary-General of the fourth International Conference on Small Island Developing States, to be held in Antigua and Barbuda on 27–30 May 2024. “We need to think differently about our support to SIDS, mindful of their unique vulnerabilities. Through more effective partnerships and a more favourable international environment we can create the space that SIDS need to shore up their domestic capacities and build resilience for the future.”

Developing economies face persistent challenges despite global disinflationary trend. Although softening international commodity prices and tight monetary stances adopted by most central banks have set the global economy on a disinflationary path, several developing economies continue to grapple with stubbornly high inflation. Many developing economies also face challenges such as elevated borrowing costs, persistent exchange rate pressures, and lingering political instability.

The stagnant employment situation in developing economies contrasts with that of developed economies, particularly in North America, Europe and Japan, where unemployment rates remain near record lows. Furthermore, the near-term outlook for certain economies is clouded by potential intensification of geopolitical tensions and multiple conflicts across the world.

Harnessing potential of critical minerals for sustainable development. The report discusses how the growing use of critical minerals for accelerating the energy transition can also be an opportunity for achieving the Sustainable Development Goals in many developing countries. Countries endowed with critical mineral resources will, however, need smart policies, as well as effective implementation capacities to reap the benefits and avoid a renewed ‘resource curse’, the report underscored.

Moreover, international cooperation will remain crucial to facilitate technology transfers and financing to developing countries, combat illicit financial flows and ensure the supply of the critical minerals needed for the green transition. Many of these issues will be covered by the recently announced Secretary-General’s Panel on Critical Energy Transition Minerals, which will develop a set of common and voluntary principles to build trust and transparency, while accelerating the race to renewables. Read the full report: https://desapublications.un.org/ Hashtag: #WorldEconomyReport

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Helen Rosengren, UN Department of Economic and Social Affairs, rosengrenh@un.org

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New York, January 25 – With multiple crises persisting around the world, including the war in Ukraine, the global output growth is expected to decelerate from around 3 per cent in 2022 to only 1.9 per cent in 2023, making it one of the lowest growth rates in recent decades, the United Nations said in its World Economic Situation and Prospects 2023.

The 178-page report’s executive summary said climate change, the Covid-19 pandemic, the ongoing 11-month-old war triggered by Russia and the resulting food and energy crises and high inflation have battered the world economy in 2022.

“Global growth is forecast to moderately pick up to 2.7 per cent in 2024, if, as expected, some macroeconomic headwinds begin to subside next year,” the report said despite the gloomy projections. “Inflationary pressures are projected to gradually abate amid weakening aggregate demand in the global economy.”

“The near-term economic outlook remains highly uncertain, however, as myriad economic, financial, geopolitical and environmental risks persist.”

A downturn in the global economy can impact on the achievement of a set of 17 Sustainable Development Goals by 2030. U.N. Secretary-General Antonio Guterres prefaced the report, calling for action to achieve the SDGs.

“This is not the time for short-term thinking or knee-jerk fiscal austerity that exacerbates inequality, increases suffering and could put the SDGs farther out of reach,” Guterres said. “These unprecedented times demand unprecedented action. This action includes a transformative SDG stimulus package, generated through the collective and concerted efforts of all stakeholders.”

Read the report  https://desapublications.un.org/

Sharp downturn in most developed economies except Japan

The report said growth momentum has weakened in the United States, the European Union and other developed economies, “adversely affecting the rest of the world economy.”

In the United States, GDP is projected to expand by only 0.4 per cent in 2023 after estimated growth of 1.8 per cent in 2022. It said higher interest rates and lower real income have prompted US consumers to cut back on spending while housing market is affected by rising mortgage rates and building costs.

The report said the E.U. economy is forecast to grow by 0.2 per cent in 2023, down from an estimated 3.3 per cent in 2022, when further easing of COVID-19 restrictions and release of pent-up demand boosted economic activities. “As the European Union continues its efforts to reduce dependence on fossil fuels from the Russian Federation, the region remains vulnerable to disruptions in the energy supply, including gas shortages,” it said.

“Despite growing at a moderate pace, Japan’s economy is expected to be among the better-performing developed economies in 2023,” the report said, adding that the country’s monetary and fiscal policy remain “accommodative.” Japan’s GDP is forecast to increase by 1.5 per cent in 2023, slightly lower than the estimated growth of 1.6 per cent in 2022.

Worsening outlook in most developing regions; challenges for least developed countries

China’s economic growth is projected to moderately improve in 2023 after weaker-than-expected performance in 2022, the report said. “Amid recurring COVID-19- related lockdowns and prolonged stress in the real estate market, the economy expanded by only 3 per cent in 2022. With the Government abandoning its zero-COVID-19 policy in late 2022 and easing monetary and fiscal policies, economic growth is forecast to accelerate to 4.8 per cent in 2023. But the reopening of the economy is expected to be bumpy. Growth will likely remain well below the pre-pandemic rate of 6 to 6.5 per cent.”

“Economic recovery in East Asia remains fragile, although average growth is stronger than in other regions. In 2023, GDP growth in East Asia is forecast to reach 4.4 per cent, compared to 3.2 per cent in 2022, mainly reflecting the modest recovery of growth in China. Yet many economies in the region (other than China) are losing steam amid fading pent-up demand, rising living costs and weakening export demand from the United States and Europe. This coincides with a tightening of global financial conditions, and countries adopting contractionary monetary and fiscal policies to curb inflationary pressures. Although the expected recovery of China’s economy will support growth across the region, any surge in COVID-19 infections may temporarily create slowdowns.”

In South Asia, the report said the economic outlook has “significantly deteriorated” due to high food and energy prices, monetary tightening and fiscal vulnerabilities. Average GDP growth is projected to moderate from 5.6 per cent in 2022 to 4.8
per cent in 2023.

“India’s economy is expected to remain strong at 5.8 per cent, albeit slightly lower than the estimated 6.4 per cent in 2022, as higher interest rates and a global slowdown weigh on investment and exports. The prospects are more challenging for other economies in the region. Bangladesh, Pakistan and Sri Lanka sought financial assistance from the International Monetary Fund (IMF) in 2022.”

Economic growth in least developed countries is projected at 4.4 per cent in 2023, about the same rate as last year and significantly below the 7 per cent growth target set in Sustainable Development Goal 8.

“In many of these countries, the risk of a lost decade is rising on the back of limited productive capacity, insufficient fiscal space, large macroeconomic imbalance and intensifying debt vulnerabilities. For the small island developing States, the short- term outlook remains bleak. Tourist arrivals have not fully recovered, and many of these countries are disproportionately affected by growing climate risks and natural disasters.” (By J. Tuyet Nguyen)

Read the report  https://desapublications.un.org/

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Istanbul/New York, July 27 – A Joint Coordination Center (JCC) comprising representatives of the United Nations, Ukraine, Russia and Türkiye was set up in a collective effort to resume shipments of Ukraine’s wheat and food products and Russian fertilizers to countries that need those commodities.

The UN said the JCC will facilitate the implementation of the Black Sea Grain Initiative signed on July 22 in Istanbul to establish a humanitarian maritime corridor that will allow shipments of grain, food stuffs and fertilizers stuck in Black Sea ports in Odesa, Chornomorsk and Yuzhny since Russian military invaded Ukraine on February 24 this year. It said the center will monitor the movement of commercial vessels to ensure compliance with the initiative; focus on exporting bulk commercial grain and related food commodities, ensure the on-site control and monitoring of cargo from Ukrainian ports; and report on shipments facilitated through the initiative.

Speaking in Istanbul after swiftly forming the JCC, Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, Martin Griffiths, said: “The swift opening of the Joint Coordination Centre was made possible with the invaluable support from Türkiye in providing the parties with a physical platform to help operationalize the Black Sea Grain initiative, and with the commitment by the Russian Federation and Ukraine in nominating and sending quickly their senior representatives to work together, directly and in partnership, in implementing the agreement.”

 “I am hopeful that their swift collective action will translate quickly and directly into much-needed relief for the most vulnerable food insecure people around the world,” he said.

Griffiths said Frederick J. Kenney, who is currently serving as the Director of Legal and External Affairs at the International Maritime Organization in London, will represent the UN as an interim representative in the JCC.

 “It is extremely encouraging to see the parties focusing on implementing the initiative,” Kenney said at the opening ceremony of JCC. “Work at the center is non-stop with the aim to see the first shipments heading out of Ukrainian ports quickly, safely and effectively.”

The JCC was set up shortly after a deal was signed on July 22 to export foods from Ukraine and Russia in an effort to stabilize global food prices. The agreement to export Ukraine’s food products and Russian food and fertilizer to the rest of the world through the Black Sea would help stabilize global food prices, UN Secretary-General Antonio Guterres said at a signing ceremony with representatives of Russia, Ukraine and Turkey.

The Black Sea Initiative would free 22 million tons of grain and food products blocked at Black Sea ports since February 24 this year. Russia and Ukraine’s wheat and Russian fertilizer are major commodities needed in developing countries.

“It will bring relief for developing countries on the edge of bankruptcy and the most vulnerable people on the edge of famine,” Guterres said. “And it will help stabilize global food prices which were already at record levels even before the war – a true nightmare for developing countries.”

Guterres said the agreement will allow shipments of high volume of commercial food exports from the Ukrainian ports in Odessa, Chernomorsk and Yuzhny and urged full implementation of the deal.

“We count on the government of Türkiye to maintain its critical role going forward,” he said. “I am here to pledge the full commitment of the United Nations. I urge all sides to spare no effort to implement their commitments. We must also spare no effort for peace. This is an unprecedented agreement between two parties engaged in bloody conflict. But that conflict continues.”

At the signing ceremony with the presence of Turkish President Recep Tayyip Erdogan, Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov signed separate deals with Guterres and Turkish Defense Minister Hulusi Akar.

The Commodity Markets Outlook released by the World Bank in April this year showed that Russia’s war in Ukraine has impacted on commodity markets with an increase in prices in energy, fertilizer and foods, which were already rising in the past two years.

It said the Ukraine war’s impact could be longer-lasting than previous shocks because price increases have been broad-based across all fuels and price increases of some commodities are also driving up prices of other commodities.

UN agencies said in a report released on July 6 that the number of people affected by hunger globally rose to as many as 828 million in 2021, an increase of about 46 million since 2020 and 150 million since the outbreak of the COVID-19 pandemic. The report provided fresh evidence that the world is moving further away from its goal of ending hunger, food insecurity and malnutrition in all its forms by 2030.

The 2022 edition of The State of Food Security and Nutrition in the World (SOFI) report presented updates on the food security and nutrition situation around the world, including the latest estimates of the cost and affordability of a healthy diet. The report also looks at ways in which governments can repurpose their current support to agriculture to reduce the cost of healthy diets, mindful of the limited public resources available in many parts of the world. The news release was jointly published by the Food and Agriculture Organization (FAO), the International Fund for Agricultural Development (IFAD), the UN Children’s Fund (UNICEF), the UN World Food Programme (WFP) and the World Health Organization (WHO).

By J. Tuyet Nguyen

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New York, May 18 – UN Secretary-General Antonio Guterres said he has been in “intense contact” with Russia, Ukraine, Turkey, the United States and the European Union to work out a solution to the food crisis threatening the livelihood of millions of people in developing countries.

 “Russia must permit the safe and secure export of grain stored in Ukrainian ports,” Guterres told a high-level ministerial meeting of the UN Security Council being presided over by US Secretary of State Antony Blinken.

”Alternative transportation routes can be explored – even if we know that by itself, this will not be enough to solve the problem. Russian food and fertilizers must have full and unrestricted access to world markets,” he said, adding that he has been also in touch with “several other key countries” to discuss the food crisis.

“I am hopeful, but there is still a way to go. The complex security, economic and financial implications require goodwill on all sides. I will not go into details because public statements could undermine the chances of success,” he said.

“But let’s be clear: there is no effective solution to the food crisis without reintegrating Ukraine’s food production, as well as the food and fertilizer produced by Russia and Belarus, into world markets — despite the war.”

Guterres said global hunger has reached new levels in just two years, from 135 million pre-pandemic to 276 million today and more than half a million people are living in famine conditions – an increase of more than 500 percent since 2016. In addition to conflict, he said the climate emergency is another driver of global hunger and over the past decade, 1.7 billion people have been affected by extreme weather and climate-related disasters.

The United States, which holds the 15-nation council’s presidency in May, said the two-day meeting will debate links between armed conflict and food security with a focus on Russia’s war in Ukraine as a major culprit for growing food prices and hunger affecting millions of people. The council will hear representatives from 30-35 countries, including those most affected by food insecurity and those that can take action and strengthen the food systems.

“The hard truth we have to reckon with is that people starve every day all around the world even though we have more than enough food to go around,” US Ambassador Linda Thomas-Greenfield said before the council meeting. “Worse, many go hungry and don’t know where their next meal will come from because warmongers are intentionally using starvation as a weapon of war. Ethiopia, South Sudan, Syria, Somalia, and Yemen are just a few examples of places where conflict is driving people to desperate hunger.”

“These Days of Action are about bringing this crisis to the center of the world’s attention, and this is – this all takes on heightened significance given Russia’s brutal and unprovoked war in Ukraine.”

UN: Fragile economic recovery from COVID-19 pandemic upended by war in Ukraine

The UN issued a mid-year economic report, saying that the war in Ukraine has “upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures.”

The World Economic Situation and Prospects (WESP) said as of mid-2022, “the global economy is now projected to grow by only 3.1 per cent in 2022, down from the 4.0 per cent growth forecast released in January 2022.  Global inflation is projected to increase to 6.7 per cent in 2022, twice the average of 2.9 per cent during 2010–2020, with sharp rises in food and energy prices.”

“The downgrades in growth prospects are broad-based, including the world’s largest economies, — the United States, China and the European Union —, and the majority of other developed and developing economies. The growth prospects are weakening particularly in commodity-importing developing economies, driven by higher energy and food prices. The outlook is compounded by worsening food insecurity, especially in Africa.”

Read report: https://www.bit.ly/wespmidyear

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New York, January 1 – A new Asia-Pacific free trade agreement that entered into force on the first day of 2022 will create the world’s largest trading bloc by economic size, the United Nations Conference on Trade and Development (UNCTAD) said.

The Regional Comprehensive Economic Partnership (RCEP), covering a third of the world economy, will eliminate 90 per cent of tariffs among 15 East Asian and Pacific countries and is expected to boost intraregional exports by $42 billion, the UN agency said in UNCTAD study published on  December 15.

The RCEP includes 15 East Asian and Pacific nations of different economic sizes and stages of development. They are Australia, Brunei Darussalam, Cambodia, China, Indonesia, Japan, the Republic of Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Viet Nam.

It will become the largest trade agreement in the world as measured by the GDP of its members – almost of one third of the world’s GDP.

By comparison, other major regional trade agreements by share of global GDP are the South American trade bloc Mercosur (2.4 per cent), Africa’s continental free trade area (2.9 per cent), the European Union (17.9 per cent ) and the United States-Mexico-Canada agreement (28 per cent).

UNCTAD’s analysis shows that the RCEP’s impact on international trade will be significant. “The economic size of the emerging bloc and its trade dynamism will make it a center of gravity for global trade,” the study said.

Amid COVID-19, the entry into force of the RCEP can also promote trade resilience. Recent UNCTAD research shows that trade within such agreements has been relatively more resilient against the pandemic-induced global trade downturn.

Eliminating 90 per cent of tariffs within bloc

The agreement encompasses several areas of cooperation, with tariff concessions a central principle. It will eliminate 90 per cent of tariffs within the bloc, and these concessions are key in understanding the initial impacts of the RCEP on trade, both inside and outside the bloc.

Under the RCEP framework, trade liberalization will be achieved through gradual tariff reductions. While many tariffs will be abolished immediately, others will be reduced gradually during a 20-year period.

The tariffs that remain in force will be mainly limited to specific products in strategic sectors, such as agriculture and the automotive industry, in which many of the RCEP members have opted out from trade liberalization commitments.

Boon for intraregional exports

Trade between the bloc’s 15 economies was already worth about $2.3 trillion in 2019, and UNCTAD’s analysis shows the agreement’s tariff concessions could further boost exports within the newly formed alliance by nearly 2 per cent, or approximately $42 billion.

This would result from trade creation – as lower tariffs would stimulate trade between members by nearly $17 billion – and trade diversion – as lower tariffs within the RCEP would redirect trade valued at nearly $25 billion away from non-members to members.

Uneven benefits among members

The report highlights that the RCEP members are expected to benefit to varying extents from the agreement.

Tariff concessions are expected to produce higher trade effects for the largest economies of the bloc, not because of negotiations asymmetries, but largely due to the already low tariffs between many of the other RCEP members.

UNCTAD’s analysis shows Japan would benefit the most from RCEP tariff concessions, largely because of trade diversion effects. The country’s exports are expected to rise by about $20 billion, an increase equivalent to about 5.5 per cent relative to its exports to RCEP members in 2019.

The report also finds substantial positive effects for the exports of most other economies, including Australia, China, the Republic of Korea and New Zealand. On the other hand, calculations show RCEP tariff concessions may end up lowering exports for Cambodia, Indonesia, the Philippines and Viet Nam.

This would stem primarily from the negative trade diversion effects, the report says, as some exports of these economies are expected to be diverted to the advantage of other RCEP members because of differences in the magnitude of tariff concessions.

For example, some of the imports of China from Viet Nam will be replaced by imports from Japan because of the stronger tariff liberalization between China and Japan.

But it’s better to be in than out

The report notes, however, that the overall negative effects for some of the RCEP members don’t imply that they would have been better off by remaining outside of the RCEP agreement. Trade diversion effects would have accrued nonetheless.

“Even without considering the other benefits of the RCEP agreement besides tariff concessions, the trade creation effects associated with participation in RCEP softens the negative trade diversion effects,” the report states.

It cites Thailand’s example, where trade creation effects completely compensate for the negative trade diversion effects.

Overall, the report finds that the entire region will benefit from RCEP’s tariff concessions, with most of these gains resulting from trade diverted away from non-members.

“As the process of integration of RCEP members goes further, these diversion effects could be magnified, a factor that should not be underestimated by non-RCEP members,” the report says.

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