Strong growth trend for developing countries threatened by volatilities: UN report

10 July 2006 –

Developing countries, including the poorest 50 among them, are on track in 2006 to continue the impressive 6.0 per cent growth rate of the past two years, but are threatened by volatility in commodity prices and interest rates, according to a new United Nations report.

“Primary commodity exporting countries should be vigilant about the risk of a sharp reversal in prices,” according to the UN World Economic Situation and Prospects, released at the current session of the UN Economic and Social Council (ECOSOC) in Geneva.

The report predicts that the 50 least developed countries (LDCS) will reach an unprecedented overall growth rate of over 7 per cent this year, as compared with 2.7 per cent for the industrialized world.

Burgeoning economic expansion in some large developing economies, particularly China, has continued to push demand for primary commodities along with non-economic factors such as geopolitical uncertainty and market speculation.

But such factors, the report warns, are highly volatile, and could be made more so by such possibilities as a sudden and sharp devaluation of an already weakened dollar due to high United States debt.

Given such threats and in order to protect and consolidate the broad-based world economic growth of the last few years, the report says that greater international cooperation is required, particularly to redress the global imbalances while avoiding recessionary adjustment in the US.

“Coordinated global adjustment will require measures that will stimulate savings in the deficit countries and domestic demand in the surplus countries,” it says.

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