The World Economic Situation and Prospects 2013
Ms. Shamshad Akhtar Assistant Secretary-General for Economic and Development of DESA
New York, 18 December 2012
Welcome to the launch of this year’s edition of the World Economic Situation and Prospects.
Overwhelming concerns remain regarding:
- Growth prospects and job issues,
- The fall in international trade and
- The inability of the finance sector to facilitate intermediation
All these elements are closely intertwined. Persisting uncertainty has eroded investor confidence
- First, I will focus on the global outlook and prospects. Weakened global economy in 2012 called for downward revisions in the growth outlook. Situation could have been more complicated but for the unprecedented rounds of global policy actions including, in particular: The unconventional monetary stimulus in the US and Outright Monetary Transaction program in Europe coupled with agreements on the European Financial Stability Facility coupled with banking and supervisory mechanism and fiscal compact. The emerging markets monetary management and their fiscal space and reserve cushions helped.
- Second, the employment scenario has been worrisome. Europe’s unemployment rates rose to 12% with some countries reporting a quarter of their population unemployed. Being mostly cyclical in nature, current high unemployment can only be addressed if there is an enhancement of both aggregate demand and supply. Yet, easing labour market rigidities would be critical to address structural unemployment in many countries.
- Third, declining world trade in response to lower demand in advanced economies is generating business and job losses. However, developing countries importance in world trade continues to increase, along with their integration in global value chains. In parallel, carbon emission-intensive freight transport services continue to grow, causing concerns about global value chains environmental sustainability.
- Fourth, Liquidity, financial speculation and the development of new commodity-backed financial products have amplified commodity price volatility. In addition, as stock-to-use ratios for most staple foods are very low, even relatively minor supply shocks may easily cause new price spikes.
- Fifth, although international currency and capital markets had somewhat stabilized, the renewed volatility resulted in “flight to safety” of capital flows, creating complications for recipient economies.
Downside risk and challenges call for close monitoring of global economy and timely corrective measures. Most critical is restoring economic growth through
- Well calibrated fiscal adjustment that supports recovery, while austerity is underway;
- Reversal in the financial deleveraging process;
- Restoring investor confidence through resolution of US fiscal cliff – some progress is evident and what is critical is passage of legislation without undue political compromise on the pace and sequencing of fiscal adjustment. In Europe, we have already seen significant progress in dealing with the debt crisis, but enhanced implementation will be critical for economic recovery and its sustainability; and
- Developing countries would need to skilfully navigate through the emerging risks and spillovers through cascading trade and finance effects and their success in maintaining growth momentum will help global recovery.
Going forward, macroeconomic stability and sustainability would help in supporting developed countries supporting the broader UN sustainable development agenda, crucial to address environmental vulnerabilities that are already impacting our ability to protect the people and the planet.
Global recovery would depend on how effectively and swiftly collective policy actions are implemented, along with satisfactory resolution of the outstanding uncertainties which are critical to restoring growth and jobs.
I would like to highlight that this report is the result of effective UN system-wide collaboration and thank my colleagues in DESA and other agencies contributing to this report: the UNCTAD, the Regional Commissions, the World Tourism Organisation and the global LINK network of economic forecasting experts.
With this, I now would like to give the floor to my colleague Rob Vos.