World Economic Situation and Prospects Mid-2016 Update at the ECOSOC

Your Excellency, Ambassador Frederick Musiiwa Makamure Shava, Permanent Representative of Zimbabwe to the United Nations and Vice-President of ECOSOCExcellencies, Ladies and Gentlemen

Please allow me to thank the Council for giving us the opportunity to present the key findings of the World Economic Situation and Prospects, as of mid-2016. I take this opportunity to highlight some of the implications of the current state of the global economy for the 2030 Agenda for Sustainable Development.

Our update paints a bleak picture of the world economy. Weak global growth continues to linger, with little prospect for a turnaround this year. Only a very modest improvement is expected in 2017, continuing the trajectory of weak global growth for nearly a decade. Prospects of a broad-based economic revival remain elusive. And the extended period of feeble investment and slow productivity growth may restrict the longer-term potential of the global economy.

Weak aggregate demand in developed economies remains a drag on global growth. Low commodity prices, mounting fiscal and current-account shortfalls, and policy tightening in some cases have worsened the outlook for many commodity-exporting economies. At the same time, these factors have been compounded by policy uncertainty, large capital outflows and severe weather-related shocks in many developing regions.

As we embark on implementing the universal and comprehensive 2030 Agenda for Sustainable Development, the dismal state of the world economy clearly poses significant challenges to our vision of making sustainable development a reality. Global growth continues to fall short of what is needed to successfully pursue sustainable development along all three of its dimensions - economic, social and environmental.

GDP growth in the least developed countries is projected to remain well below the SDG target of “at least 7 per cent GDP growth” in both 2016 and 2017. This is likely to undermine vital public investment in education, health and climate change adaptation, as well as progress in poverty reduction. SDGs 1, 2, 3 and 4 will remain out of reach for many LDCs if SDG 8, underscoring the imperatives of decent work and economic growth, continues to falter.

Our report also highlights the potentially devastating effect of El Niño on poverty. Losses in the agricultural sector and high food prices tend to have a disproportionately large impact on the poor. Concerted policy measures are needed to ensure that damages caused by weather related shocks do not undermine national and global efforts to “end poverty in all its forms”, as envisaged in SDG 1. At the same time, widespread global unemployment and job insecurity pose a significant challenge to global efforts to promote “inclusive and sustainable economic growth, employment and decent work for all”.

The level of investment needed to restore healthy growth and achieve the 2030 Agenda is substantial. Financial market volatility and growing financing constraints have exacerbated this already formidable challenge.
  • Commodity-exporting economies, for example, have suffered a sharp drop in government revenue, prompting cutbacks in investment plans in many countries.
  • Domestic financing costs have risen with monetary tightening in many developing countries, as they seek to maintain moderate inflation, stable currencies and financial stability.
  • Foreign direct investment has declined in Africa, Latin America and the economies in transition, and many developing countries remain vulnerable to capital flow volatility.
  • Total official development assistance flows from developed countries remain well below the targeted commitments.
  • New fiscal pressures compound the longstanding challenges of tax evasion, tax avoidance and illicit financial flows that affect many countries. Strengthened global policy coordination and collaboration to realize these lost tax revenues would help to ease financing constraints in the short-term and mobilise resources to finance sustainable development in the long run.
With public sector, private sector and international financing flows remaining well below their potential, rapid implementation of the Addis Ababa Action Agenda becomes increasingly crucial to mobilize more resources and boost public and private investments for sustainable development.

The World Economic Situation and Prospects as of mid-2016 also underscores the need for a more balanced policy mix to rejuvenate global growth and create an enabling environment to achieve the 2030 Agenda. The developed economies have relied far too long on monetary stimuli, without commensurate support from the fiscal side. It is unlikely that further monetary expansion will lift global growth.

A more robust and supportive fiscal stance, especially if coordinated among the largest economies, could provide a much needed impetus to the global economy. In many developing and transition economies, Governments should aim to effectively exploit available fiscal space, as well as broaden the tax base, strengthen tax administration and increase compliance, in order to maximize fiscal space and stimulate public investment programmes. The report makes a clear case for appropriate, effective and timely policy measures for realizing a world where every country enjoys sustained, inclusive and sustainable economic growth and decent work for all.

The report also shows that a pro-active policy can deliver desirable outcomes. For example, global energy-related carbon emissions remained flat in 2015, while renewable energy investment reached a new record. This is largely attributable to strong policy support and initiatives, and suggests that a delinking of economic growth and carbon emission growth is possible, with appropriate policies and adequate investment. The policy efforts should seek to capture and accelerate the momentum that Member States generated with the landmark global agreements – the Addis Ababa Action Agenda, the 2030 Agenda and the Paris Agreement on Climate Change – reached in 2015.  These global agreements should encourage Member States to undertake bolder policy measures at national, regional and global levels to restart the engine of growth. The challenges that face us are large, but not insurmountable, especially if we confront them with a collective resolve.

Thank you.

Please check against delivery.

File date: 
Wednesday, June 1, 2016
Lenni Montiel