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UN calls for bolder policies to stem global economic downturn

UN calls for bolder policies to stem global economic downturn

For the world economy to regain its momentum this year, the major economies will have to be "firing on all engines and at the same time," the UN Conference on Trade and Development (UNCTAD) said today as it released a major new study on global economic prospects.

According to UNCTAD's Trade and Development Report, 2001, bolder policies from, and cooperation among, all the largest economies will be needed to stop the situation from deteriorating further.

After a strong year in 2000, doubts about the health of the world economy have "come back with a rush" in 2001 and, without determined policy responses everywhere, the "downside risks are considerable," UNCTAD's economists warn.

Stressing that longer-term world prospects cannot hinge on events in a single country, UNCTAD says that so far, policy makers in the United States have shown their willingness to respond to worrying economic signals, but Europe has remained reluctant to follow suit, and Japan's "limited room for expansionary policy" holds out at best a hope for gradual improvement.

UNCTAD ascribes the current economic downturn to the unwinding of the hi-tech boom in the United States and notes that hopes of a rapid US rebound are beginning to fade. The question is how long and how deep the downturn will be and whether a swift response by US authorities will bring about an orderly recovery.

The hope now, UNCTAD says, is that Europe, where growth in 2000 broke the 3 per cent barrier for the first time in a decade, will "grasp the baton" from the US. However, Europe's limited trade ties with the US do not mean the continent is immune to the slowdown across the ocean and without a determined change in economic policy, growth in the European Union is unlikely to reach 3 per cent this year and may be much lower.

In Japan, UNCTAD notes, hopes that the economy was beginning to build a head of steam rose through the first half of 2000, but the second half of the year saw stagnant growth and rising unemployment, with the signs in early 2001 continuing to disappoint.

In addition to giving an overview of the world's largest economies, the report discusses the situation of developing countries. It notes that while those countries posted an encouraging overall growth rate of 5.5 per cent in 2000, there is little likelihood that those performances will be repeated this year.

While prospects in emerging markets very much depend on how countries are plugged into the global economy, the report states, all are vulnerable to a sharp global slowdown. Stimulating growth needs to be the uncompromising policy message everywhere, UNCTAD asserts.