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altThe first Vi videoconference of the year, held February 8, gathered 20 students and lecturers from the Faculty of International Economic Relations of core member, the Belarus State Economic University (BSEU), for a presentation on the global economic outlook and policy challenges delivered by Nicolas Maystre (pictured. left), of UNCTAD’s Division on Globalization and Development Strategies. This very first videoconference for BSEU was hosted by the United Nations Development Programme office in Minsk.

The presentation was based on UNCTAD's Trade and Development Report 2012 (TDR) and the World Economic Situation and Prospects 2013, a joint publication of UNCTAD, United NationsDepartment of Economic and Social Affairs and the United Nations regional commissions.
"The world economy is in a fragile stance, with a growing number of developed economies falling into double-dip recessions and others stuck in low growth,"Maystre began. "Much of Europe is trapped in a vicious cycle of debt, financial fragility, fiscal austerity and high unemployment. At the same time, growth in the major developing and transition economies (Brazil, China and India) has slowed significantly."
 
The slowdown has been synchronized across the major world regions, as the growth of the world gross product fell from 2.7 percent in 2011 to 2.2 percent in 2012.
 
Among developing countries, growth in Asia and Latin America and the Caribbean weakened significantly in 2012 due to the sharp slowdown of China, India and Brazil.
 
"One notable exception to the overall trend is Africa, where growth in 2012 was stronger than in 2011 as North Africa recovered from political turmoil," Maystre said.
 
However, developing economies remain the engine of global growth, accounting for 74 percent of world GDP growth between 2006 and 2012, up from 25 percent in the 1980s and 1990s.
 
In terms of the global economic outlook, Maystre warned that the prospects for the coming years continue to be disappointing, with global output forecast to grow by only 2.4 percent in 2013 and 3.2 percent in 2014 – a pace well below potential.
 
"While the UN baseline forecast projects sluggish growth in the years ahead, there is still a high risk of a downward spiral that leads the world economy into a new recession," he added, citing an escalation of the euro zone crisis, the fiscal cliff in the United States and a hard landing in China and other emerging economies, as major threats to global growth.
 
Developed economies continue to struggle to get out of the so-called low-growth trap - a situation characterized by high unemployment, deleveraging of households and firms, financial sector fragility and fiscal austerity.
 
"The policy focus so far has been placed on repeated rounds of monetary expansion and structural reforms, but this will have a gradual effect on growth at best,” he said. “The risk for the global economy to slip into another recession thus remains unabatedly high."
 
To break out this vicious cycle requires more forceful and concerted policy action at the global level. A fundamental policy shift from fiscal austerity toward fiscal policy oriented at job creation and growth, better coordination of monetary policies and more stringent financial sector reforms are needed, Maystre concluded.
 
Questions from the participants touched on: instruments to revive the economic cycle (the role of government spending as well as the need for wages to rise in line with productivity); the adverse effects of fiscal austerity in a situation of weak demand; the role of progressive taxation; the outlook for emerging economies as an engine of global economic growth; the impact of population growth and aging on economic growth; the need for government regulation of (financial) markets; the evolution of inequality in emerging countries; and potential migration incentives for workers across countries.
 

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