FOLLOWING TERRORIST ATTACKS, UN REVISES FORECAST FOR WORLD ECONOMIC GROWTH IN 2001
TO 1.4 PER CENT; WARNS THAT LONG-RUN GROWTH RATE WILL BE ‘ADVERSELY AFFECTED’
The attacks on the United States on 11 September will have far-reaching economic effects, further slowing a world economy already growing at its lowest rate in a decade and hastening the contraction of many economies around the world, according to a report released today by the United Nations.
“The shock is expected to reverberate through the world economy and global financial markets in the coming months”, the report states. Military and political reactions to the attacks will “greatly amplify” already existing uncertainties about the short-term global outlook and are likely to have significant long-run implications as well.
The growth of world gross product is expected to be 1.4 per cent for 2001, with a recovery to 2 per cent in 2002. The volume of international trade is expected to register “virtually no growth” in 2001, the United Nations warns, but is expected to increase by 4 to 5 per cent in 2002.
The United Nations report anticipates a worse-than-expected downturn in the United States, with the attacks expected to cause “an absolute decline in gross domestic product (GDP) in the third and fourth quarters.”
Different regions of the world are likely to feel the negative impacts of the slowdown, as aggravated by the attacks, in various degrees, the report states. The most severely affected developing economies are expected to be those of South and East Asia, where 2001 GDP growth projections have been dropped from
4.1 per cent to 1.7 per cent. The GDP growth in Africa has been revised downwards from 4.3 per cent to 3 per cent, and in Latin America the GDP is projected to grow at 0.8 per cent, down from 3.1 per cent. Among developed countries, Canada will feel the greatest impact of the significantly weaker United States economy, but Japan’s performance is expected to be the weakest, with the GDP likely to decline more than 0.5 per cent in 2001.
The United Nations report is released on the same day as Nobel Laureate Lawrence Klein speaks to the Second Committee on the state of the world economy. The following week, the United Nations convenes a Preparatory Committee meeting in New York (15-19 October) for the upcoming International Conference on Financing for Development.
The Economic Assessment and Outlook Branch of the United Nations Department of Economic and Social Affairs, which prepared the 11 October report, points to
five major economic impacts of the attacks: destruction of human and physical capital; disruption of economic activities; shift in the confidence of consumers and businesses; changes in macroeconomic policies in major economies; and changes in the allocation of resources in the longer run. According to the report, the longer-run consequences are likely to be of greater economic significance than the immediate effects.
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