New United Nations report revealed that countries throughout the world will experience an economic slowdown this year as the sovereign debt crisis in Europe continues to unfold.
World Economic Situation and Prospects 2012 (WESP) report also warns that governments must urgently address high unemployment rates.
World Economic Situation and Prospects (WESP) is a joint product of the Department of Economic and Social Affairs, the United Nations Conference on Trade and Development and the five United Nations regional commissions. It provides an overview of recent global economic performance and short-term prospects for the world economy and of some key global economic policy and development issues.
The report gives a detailed picture on seven geographical regions and forecasts that growth rates for the next two years will slow down in most of them. The report stated that African continent will continue to enjoy growth due to stable commodity prices and foreign investment.
The report points to the European sovereign debt crisis that erupted in Greece last May as a major shock to the global economy. The crisis brought multiple negative effects that continue to reverberate around the world.
“Failure of policymakers, especially those in Europe and the United States, to address the jobs crisis and prevent sovereign debt distress and financial sector fragility from escalating poses the most acute risk for the global economy in the outlook for 2012-2013.” -UN report
The report estimates that growth in the European Union (EU) is expected to be only 0.7 per cent in 2012, substantially lower than the 1.6 per cent growth registered last year.
Africa is expected to continue to grow, defying the global trend. The growth will mainly be driven by relatively strong commodity prices, solid external capital inflows and continued demand and investment from Asia.
The report cited that growth will vary greatly among countries in the continent due to military conflicts, corruption, lack of infrastructure and severe drought in certain areas.
South Africa is expected to have the strongest economic growth in 2012, supported by growing demand from Asia, continued fiscal stimulus measures and an increase in consumption driven by rising wages.
The economic picture in the Arab World will continue to be subject of high uncertainty due to the political transition and civil protests brought by the Arab Spring.
As with Europe and Africa, unemployment remains a key problem in the region. Despite extremely low female participation rates, unemployment rates in the region are among the highest in the world.
In East Asia growth is projected to decline to 6.9 per cent in both 2012 and 2013. China, the biggest economy in the region, is also expected to slow down from 9.3 per cent to 8.7 per cent growth in 2012.
The South Asian and Latin American and Caribbean regions remain particularly susceptible to the future of developed economies as both the EU and the US are key export markets as well as sources of tourism revenue.
For Latin America, a slowdown in China would also adversely affect the region as it is a major buyer of its commodities and a key investor in South America.
“Clouds over the region are darkening. The risks of further worsening of the situation in Europe and the United States have increased.” – UN economist Rob Vos