New UN report projects global economic slowdown spurred by US retrenchment
The report, produced by a network of researchers from over 60 countries participating in an initiative known as Project Link, forecasts global economic growth at 2.4 per cent this year, down from 4 per cent in 2000. It blames this trend on retrenchment in major developed economies, noting that "the economy of the United States has been at the heart of the current weakness in the global economy."
As such, the report cautions that "the biggest downside risk for the global economic outlook is a deeper and more prolonged slowdown in the United States." A recession in the US "would be transmitted to many other economies," it warns.
The report does not predict an impending recession in the US, but it notes that "growth for the first half of 2001 might well turn out to be flat." The sharp constriction in the country's economy is evident in statistics presented in the report, which show the growth rate dropping from 5 per cent in the second quarter of 2000 to 1 per cent by the end of that year.
Introducing the report at a press conference today, Project Link founder Professor Lawrence Klein, a Nobel Laureate, said that for most of the 1990s, "the United States has been the prime mover for the world economy." With the country's economy now shrinking, he said Project Link experts had documented "the effect of the US slowdown on the rest of the world."
Looking to the future, Professor Klein predicted that the contraction of the US economy would not be protracted. "The slowdown will not last so long -- the recovery might be gradual, but it doesn't mean a long, drawn-out recession," he said.
Another Project Link participant, Professor Peter Pauly of the University of Toronto, said action was needed to determine the future course of the global economy. "All in all this is a challenging time after many years favourable signs all around, and it calls for quite decisive policy action to turn this from what might be a fairly prolonged growth reduction in the world economy into a short-lived experience," he said.