UN survey sees slow economic recovery in 2001

A deep slowdown in the world's major economies - triggered by the downturn in the United States - is dragging down growth prospects of developing and transition economies, and threatens to continue well into the second half of 2001, according to the latest United Nations survey of the world economy released today.

According to the "World Economic and Social Survey 2001," which was launched simultaneously in New York and Geneva, pulling out of the current worldwide slump will be hampered by the new features in the business cycle - corporate profit, the availability of credit and investment spending - that helped fuel the rapid expansion in the United States in 1999 and 2000 in the first place.

"Correspondingly, the factors behind the slowdown [in the United States] were the interrelated decline in corporate profits, the tightening of credit conditions and the decrease in investment spending," the survey says. "This combination of factors, rather than an acceleration in core inflation, caused business confidence to decline and brought the investment boom to an end, precipitating a slowdown."

Prior to the slowdown, 2000 was "a remarkably good year," according to Ian Kinniburgh, Director of the UN's Development Policy Analysis Division, which prepared the report.

Speaking at a news conference at UN Headquarters in New York, Mr. Kinniburgh said that for the first time in 10 years, none of the economies in transition went backward and declined in gross domestic product (GDP).

"There was some optimism that we might be able to maintain some of that momentum into 2001," he said. "But as everybody knows, some of that momentum was lost and it starting going downhill during the last quarter of 2000.

"The United States economy supported the rest of the world economy during the [last] crisis but it now seemed to have stalled or slowed down," he said.

To head off large imbalances in economies in the long run, the report urges reform of the global trading system and the international financial architecture "in order to facilitate development by securing less volatile and more balanced world economic growth."