The world economy is teetering on the brink of another major downturn. As in 2008, economic woes in the major developed economies are weakening economic prospects around the world. This and other findings were presented as DESA’s flagship report the World Economic Situation and Prospects (WESP) 2012 was launched today in Addis Ababa, Beijing, Geneva, Johannesburg, Moscow and New Delhi. Regional releases of the report are also scheduled for Mexico City on 18 January; and in Bangkok and Beirut on 19 January.
There are multiple concerns, but policymakers throughout Europe and the United States are mainly fixated on reducing large fiscal deficits and public debt. The concerns are serious, and the ongoing sovereign debt crises in the euro zone have been a source of continuous turmoil in financial markets.
Unfortunately, the present policy responses are highly inadequate. Most developed economies have phased out stimulus measures and shifted to fiscal austerity. With unemployment rates remaining very high and financial sectors still clogged, this approach is pulling the plug on the recovery by exacerbating the lack of aggregate demand, further weakening the prospects for jobs recovery and economic development in the longer run.
Bleaker medium and long-term growth prospects would also undermine the financial sustainability of health and pension systems over time, thus achieving precisely the opposite of what policymakers are aiming at through fiscal austerity.
Is there an alternative? Yes. As shown in the UN’s World Economic Situation and Prospects 2012, many developed countries have more than adequate fiscal space for additional stimulus. If well targeted at job creation and green growth and adequately coordinated internationally, additional stimulus could quicken the recovery and put the global economy on a more balanced and sustainable growth path.
In conjunction with the launch of the World Economic Situation and Prospects 2012, the Development Policy and Analysis Division (DPAD) of UN DESA is organizing a live chat on Facebook to answer questions concerning the risks and opportunities for the world economy, as well as the scope for policy action in the year ahead.
Join Rob Vos, Director of DPAD, and economists from the Global Economic Monitoring Unit for this live Facebook chat on 20 January 2012 at 9:00 am to 10:00 am EST at http://on.fb.me/wesp2012