CHAPTER 1

FORECASTING AND FRAMING THE GLOBAL ECONOMIC OUTLOOK

No country is left unscathed by global shocks and economic crises, but what is crucial is the ability to anticipate, prepare and build future resilience. A shared understanding of the global economic outlook is essential to shape solutions that can help us achieve the SDGs. UN DESA is attempting to fill this critical role by forecasting the global and regional economic outlook, building capacities, and putting forward policy solutions to steer the world towards a more sustainable economic future. UN DESA brings experience across several foresight related areas, including macroeconomic modelling and forecasts; megatrend analysis; technological foresight; big data and metrics. Publications address both short-term macroeconomic forecasts and longer-term development trends based on different modelling tools and continuous monitoring of the implications of digital and frontier technologies for sustainable development.

KEY FORESIGHT AND PREPAREDNESS FUNCTIONS IN THIS CHAPTER

1. Economic forecasting and modelling

2. Frontier issues analysis

3. Identifying pathways for LDC graduation

“The current global economic outlook presents an immediate challenge to delivering on the SDGs. The global community must urgently address the growing shortages of funding faced by many developing countries, strengthening their capacities to make critical investments in sustainable development and helping them transform their economies to achieve inclusive and sustained long-term growth.”

UN Under-Secretary-General for Economic and Social Affairs Li Junhua on the publication of the World Economic Situation and Prospects report, May 2023

CONTEXT AND CHALLENGES

The world economy struggles to recover from the pandemic and is forecast to continue to face low growth rates over the next few years. While rich economies have largely bounced back from the COVID-19 pandemic, developing economies have lost ground. Ever-worsening climate shocks continue to pose additional challenges to the global economic outlook, threatening decades of development gains, especially for least developed countries (LDC) and small island developing States.
LDCs, which already face several developmental challenges, continue to face spiralling challenges of access to finance and high indebtedness. At the same time, a significant number of LDCs have experienced successful development progress and are on track to graduate from this category. Graduation brings both opportunities of investment and growth, as well as risks to sustaining efforts as access to preferential terms of trade and international financing end when countries graduate. Unforeseen shocks are likely to bring more uncertainty, which may throw graduating and graduated countries off-course in their transition to higher development and growth, increase their vulnerabilities, and set back progress on the SDGs. Without adequate knowledge, information, analysis, and capacity-building, developing countries will face significantly greater challenges in achieving sustainable development.

FORESIGHT AND PREPAREDNESS FUNCTIONS

1.

Economic forecasting and modelling

UN DESA’s flagship World Economic Situation and Prospects (WESP) report provides economic forecasts and analysis on economic trends and emerging policy challenges, with in-depth focus on developing economies and emerging markets. This robust analysis and projections, based on solid evidence, is incredibly useful in helping policymakers to plan for uncertain futures and to design more agile and impactful approaches to achieve the SDGs.
WESP monthly briefings based on ongoing monitoring of the global economy complement the main WESP report to identify anticipated and contemporary macroeconomic policy issues and challenges worldwide. The policy papers cover a range of foreseeable challenges, recently addressing issues such as inflation, food and energy price shocks, disruptions in trade and supply chains, financial market distress, and labour market challenges. These briefs also provide knowledge and reflections on policy measures undertaken by governments and the effect that has on the economy. For instance, recent briefs have investigated how monetary and fiscal policy measures following the COVID-19 pandemic are impacting interest rates, kickstarting the economy or impacting levels of indebtedness of countries, and reflect on structural impediments, global uncertainties or external shocks that can derail an economy.
The Department also delivers modelling capacity for forecasting and scenario analysis, and provides capacity development and policy advisory activities on economy-wide issues and on methodologies to integrate the economic, social and environmental dimensions of sustainable development. Activities focus on training and advising policymakers in developing countries to enhance their analytical capacities in designing coherent and integrated macroeconomic, social and environmental policies. This aims to strengthen the capacity of Government agencies to better utilize data and analytical techniques to inform decision-making processes on sustainable development through the use of quantitative modelling tools. The successful adoption of these tools is expected to improve analytic capacity for decision-making and national planning processes.

2.

Frontier issues analysis

UN DESA delivers policy briefs that explore frontier issues and resilience building for future crises. Frontier technology issue briefs cover topical issues ranging from the impact of the technological revolution on labour markets and income distribution, harnessing economic dividends from demographic change, and issues from the frontiers of science such as lithium-ion batteries as a pillar for a fossil fuel-free economy, and genetic technologies as a game changer for food production, crop yields, disaster risk management, and health. These materials help country-level policy makers make informed decisions on appropriate risk management strategies and policies.
The Department continues to fill critical knowledge gaps in times of crises. For example, the dynamic heatmap model pioneered by UN DESA shortly after the start of the war in Ukraine is an innovative tool that monitors vulnerability and coping capacity to the crises. The “Impact of the War in Ukraine on LDCs” heatmap monitors the vulnerability of LDCs to the impacts of the war on food, energy and finance and presents a ‘heatmap’ that shows data for all developing countries, including LDCs, against various indicators. The monitoring complements and contributes to the work of the Global Crisis Response Group of the Secretary-General of the United Nations and to analytical and monitoring work of UN entities and international organizations. The model could be used more widely in foresight and preparedness work for other future crises.
UN DESA also addresses foresight and mega-trend analysis as coordinator of the UN Economist Network. The Network currently connects more than 500 colleagues at global, regional and country levels, serving as a platform to strengthen UN thought leadership, knowledge sharing and capacity building. For example, its report Shaping the Trends of Our Time, examined five megatrends: climate change; demographic shifts, particularly population ageing; urbanization; the emergence of digital technologies; and inequalities –that are affecting economic, social and environmental outcomes. The Network has also provided new forward-looking paradigms for economic thinking in the policy brief series on New Economics for Sustainable Development, as well as on specific topics such as digital economic transformation, innovative finance, migration, informal economy and taxation.

3.

Identifying graduation pathways for LDCs

With UN DESA as its secretariat, the Committee for Development Policy (CDP), advises on graduation pathways for countries in the least developed country (LDC) category. Many LDCs are benefitting from UN DESA’s support to help them achieve a smooth transition out of the category and anticipate upcoming challenges that LDCs might face in their graduation journey. This includes through collecting and disseminating information on LDCs and countries that have recently graduated from the category and by maintaining the Committee for Development Policy (CDP) knowledge platform.
The platform includes the LDC portal which provides information on international support measures for LDCs, which is critical to help them prepare for a smooth transition. With the platform, an innovative Gradjet provides information on the graduation process to prepare for a smooth transition. The ePing notification toolkit, developed by UN DESA, lets LDCs submit and track key information from trading partners regarding new export product requirements and, in the process, strengthens coordination between government agencies and the private sector. Finally, UN DESA’s Handbook on the Least Developed Country Category is regarded as the single most authoritative global resource on LDCs and their graduation. Updated every few years, the handbook provides comprehensive up-to-date information that explains the LDC category and what procedures and methodologies are used to include countries in this category and to graduate from it.
Early indication of how future crises or external shocks might disrupt their economic and social development efforts is critical so LDCs can develop and integrate crisis response measures into their national development strategies and strategies for a smooth graduation. The Department’s policy notes on the potential impacts of LDC graduation for several countries are also helping countries to plan their strategies accordingly. For instance, countries to understand how the withdrawal of international support measures could impact them in the short and medium term implications of losing access to special provisions for LDCs on Trade-related Aspects of Intellectual Property Rights (TRIPS).
Next Chapter

EFFECTIVE GOVERNANCE AND LEAVING NO ONE BEHIND IN FORESIGHT EFFORTS