On 17 January, the World Economic Situation and Prospects 2012 (WESP) will be launched in multi-city locations around the world. The first chapter of the report on the “Global economic outlook”, pre-released on 1 December 2011, reveals that persistent high unemployment, the euro area debt crisis and premature fiscal austerity have already slowed global growth and factor into the possibility of a new recession.
The forecast has been significantly downgraded compared to six months ago and predicts that the global economy will “muddle through” with the growth of world gross product (WGP) reaching 2.6 per cent in the baseline outlook for 2012 and 3.2 per cent for 2013, down from 4.0 per cent in 2010.
2012 is projected to be a make-or-break year in terms of proceeding with slow economic recovery or falling back into recession. “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,” states the report.
“The developed economies are on the brink of a downward spiral enacted by four weaknesses that mutually reinforce each other: sovereign debt distress, fragile banking sectors, weak aggregate demand and policy paralysis caused by political gridlock and institutional deficiencies.”
Slower growth in developed countries affects developing countries
Developing countries and economies in transition are expected to continue to stoke the engine of the world economy, growing on average by 5.4 per cent in 2012 and 5.8 per cent in 2013. This is well below the pace of 7.1 per cent achieved in 2010. And even as economic ties among developing countries strengthen, they remain vulnerable to economic conditions in the developed economies. From the second quarter of 2011, economic growth in most developing countries and economies in transition started to slow notably.
Persistent high unemployment in the US at a rate of more than 9 per cent and low wage growth are further holding back aggregate demand and, together with the prospect of prolonged depressed housing prices, this has heightened risks of a new wave of home foreclosures, especially in the US.
Growth in the euro zone has slowed considerably since the beginning of 2011 and the collapse in confidence displayed by a wide variety of leading indicators and measures of economic sentiment suggest a further slowing ahead. Even with an optimistic assumption that the debt crisis can be contained within a few countries, growth is expected to be only marginally positive in the euro area for 2012.
Japan was in another recession in the first half of 2011, caused largely, but not exclusively, by the disasters of the March earthquake. Among the major developing countries, growth in China and India is expected to remain robust, however. Brazil and Mexico are expected to suffer more visible economic slowdown. Low-income countries have experienced only a mild slowdown.
A 64 million jobs deficit
The rate of unemployment averaged 8.3 per cent in developed countries in 2011, still above the pre-crisis level of 5.8 per cent recorded in 2007. Almost 1/3 of the unemployed in developed countries had been without a job for more than one year, affecting about 15 million workers. Prolonged unemployment tends to have long-lasting detrimental impacts on both the affected workers and the economy at large, as skills of unemployed workers deteriorate, leading to lower earnings for affected individuals and lower productivity growth.
In developing countries, the employment recovery has been much stronger. For instance, unemployment rates are back to pre-crisis levels or below in most Asian developing countries and in Latin America employment has recovered in most countries. However, developing countries continue to face major challenges owing to the high shares of workers that are underemployed, poorly paid, have vulnerable job conditions and lack access to any form of social security. At the same time, open unemployment rates remain high, at well over 10 per cent in urban areas.
The UN estimates that there was an employment deficit of 64 million jobs worldwide in 2011. This is the number of jobs needed in order to restore pre-crisis employment levels and absorb the new labour entrants.
Fiscal austerity part of the problem
The harsh fiscal austerity measures implemented in developed countries and elsewhere in response to relatively high levels of fiscal deficit and public debt are further weakening growth and employment prospects, making fiscal adjustment and repairing financial sector balance sheets more challenging.
The sovereign debt crises in a number of European countries worsened in the second half of 2011 and further weakened the balance sheets of banks sitting on these assets. Even bold steps by the Governments of the euro zone countries to reach an orderly sovereign debt workout for Greece were met with continued financial market turbulence and heightened concerns of debt default in some of the larger economies in the euro zone; Italy in particular.
The possibility of failure of the bipartisan “supercommittee” of the US Congress to reach agreement on medium-term budget cuts was already contemplated in the baseline assumptions of the UN forecast. Downside risks have heightened, however, in particular what could happen with regard to two stimulus measures expiring on 1 January 2012, namely, the 2 per cent payroll tax cut and emergency unemployment benefits. If not extended, GDP growth in the US would slow further in 2012.
The EU and the US form the two largest economies in the world and they are deeply intertwined. Their problems could easily feed into each other and spread into another global recession. Developing countries, which had rebounded strongly from the global recession of 2009, would be hit through trade and financial channels.
More vigorous, concerted policy responses needed
Existing national policies and the Cannes Action Plan of the G20 do not add up to a scenario of stronger employment growth and do not sufficiently address the downside risks.
The WESP calls on developed country governments not to embark prematurely on fiscal austerity policies given the still fragile state of the recovery and prevailing high levels of unemployment. Even with high levels of public indebtedness, many countries still enjoy very low borrowing costs and have fiscal space left for additional fiscal stimulus.
The report further recommends more forceful international coordination of additional stimulus measures across countries and refocused policies to stimulate more direct job creation and investment in infrastructure, energy efficiency and sustainable energy supply, and food security, paving the way for unwinding indebtedness and enacting needed structural reforms over the medium run.
Dipetik dari - DESA News - United Nations Department of Economic and Social Affairs
No comments:
Post a Comment