By Devinder Kumar
NEW DELHI | BANGKOK (IDN) – Prolonged trade disputes and wide-ranging policy uncertainties have catapulted the world economy into a significant and broad-based deterioration in 2019. This threatens to hamper efforts to reduce poverty, create decent jobs, broaden access to affordable and clean energy, and achieve many other Sustainable Development Goals (SDGs).
According to the United Nations World Economic Situation and Prospects (WESP) 2020 report, gross product growth slipped to 2.3 per cent in 2019—the lowest rate since the global financial crisis of 2008-2009.
This slowdown is occurring alongside growing discontent with the social and environmental quality of economic growth, amid persistent inequalities and the deepening climate crisis.
The report warns: “Even as global trade tensions ease along some fronts, the potential for relapse is high, as important issues underlying these disputes have yet to be tackled in depth. Based on the assumption that potential setbacks will not materialize, a modest uptick in global growth to 2.5 per cent is forecast for 2020, though policy uncertainties will continue to weigh on investment plans.”
The report further states that trade policy uncertainty has taken a toll on global investment and exports, trade tensions have become intertwined with financial fragilities, and there are growing concerns that monetary policy has reached its limits.
Also, risks are strongly tilted to the downside, amid deepening political polarization, increasing scepticism over the benefits of multilateralism and limited global policy space and further easing my exacerbate risk.
“Any one of the downside risks is likely to aggravate other risks, potentially derailing the global economy. Compounded by deepening political polarization, increasing scepticism over the benefits of multilateralism and limited global policy space, these difficult near-term headwinds have the potential to inflict severe and long-lasting damage on society and pose a considerable threat to prospects for achieving the Sustainable Development Goals by 2030,” cautions the report.
Amid concerns about overstretched monetary policies, the report calls for a more balanced policy mix. It draws attention to the fact that while central banks have responded swiftly to the deteriorating global outlook, fiscal policy has generally been underutilized as a countercyclical tool.
In view of interest rates at historic lows, the United Nations pleads with Governments that have ample fiscal space and pressing public investment needs to make use of the current favourable financing conditions. However, it is aware that high debt levels and sizeable fiscal deficits limit the room for fiscal stimulus in many cases.
The report argues that, as the scope for further fiscal and monetary easing is limited in many countries, efficiency in policymaking takes on an increasingly important role. “This requires moving away from a focus on short-term targets towards longer-term planning for inclusive economic development.”
Structural shifts in the design of fiscal policy should be carefully integrated with labour market initiatives, conducive business and financial regulation, effective social protection systems and prudently targeted investment incentives, it adds.
According to the report, a balanced policy approach stimulates economic growth while moving towards greater social inclusion, gender equality, and environmentally sustainable production and consumption.
“Although national priorities differ, some common overarching global priorities include scaling up investment and aligning policy to decarbonize energy, agriculture and transport; undertaking targeted infrastructure investment to broaden access to clean and renewable energy, clean water and transport links; and supporting equal opportunities in access to high-quality education, health care and formal employment,” says the report.
The United Nations report calls for complementing national policies by more effective global cooperation in order to achieve shared goals, particularly in the areas of climate change, international trade and finance. The reason: Many development challenges are global in nature and cannot be adequately addressed by domestic structural policies alone.
Global economic balance is shifting from the European Union, the United States and other developed countries towards China, India and other developing countries. Global economic decision-making power is shifting as well. “Global cooperation mechanisms will need to recognize this shifting balance while continuing to allow the underrepresented to be heard,” emphasises the report.
Highlighting that headline GDP figures miss crucial aspects of the quality of economic growth, the report says: While GDP is the measure most widely used to assess economic prosperity and performance, it reveals nothing about how income is distributed within a country; the impact of economic activity on natural resources and the environment; or the quality of life enjoyed by the population in terms of education, health or personal safety.
It is no surprise therefore that calls for change are widespread across the globe, reflecting a growing discontent with the quality of growth underlying the current economic, social and environmental status quo.
“Along many dimensions, global well-being continues to fall well short of targeted levels,” says the report. While the number of people living in extreme poverty has risen in several sub-Saharan African countries and in parts of Latin America and Western Asia, deadly conflicts continue, the climate crisis is deepening, the number of people suffering from food insecurity and undernourishment is rising, and there is increasing recognition that inequalities in income, education, health and opportunity underpin profound social discrimination, it adds.
The World Economic Situation and Prospects is a joint product of the United Nations Department of Economic and Social Affairs (UN DESA), the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commis-sions (Economic Commission for Africa (ECA), Economic Commission for Europe (ECE), Economic Commission for Latin America and the Caribbean (ECLAC), Economic and Social Commission for Asia and the Pacific (ESCAP) and Economic and Social Commission for Western Asia (ESCWA)
The United Nations World Tourism Organization (UNWTO), and staff from the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), and the International Labour Organization (ILO) also contributed to the report. [IDN-InDepthNews – 22 January 2020]
Photo: The number of people living in extreme poverty has risen in several sub-Saharan African countries and in parts of Latin America and Western Asia. Credit: UN/Logan Abass
IDN is flagship agency of the International Press Syndicate.
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