World economy defied slump predictions after September terror attacks, UN reports
Consumer spending in 2001 helped pull the United States out of its recession last year and was a major factor why the world economy avoided the deep downturn predicted in the aftermath of the 11 September terror attacks, according to a new United Nations report on global trade and development.
Overall world economic growth last year slowed to 1.3 per cent, down from 3.8 per cent in 2000, as the US slump weakened performance in all the important economic regions in the developed world and the spillover effects on developing countries were stronger than in previous downturns, the UN Conference on Trade and Development (UNCTAD) says in its 2002 “Trade and Development Report.”
International trade also played a major role in transmitting the slowdown in the industrial world to developing countries, UNCTAD says. After growing by 14 per cent in 2000, export volumes for developing countries grew by less than 1 per cent last year.
But so far, stronger-than-expected consumer spending, boosted by relatively buoyant labour market conditions and improving consumer confidence, has limited the drop in output and signalled a turnaround, UNCTAD says. For a strong and lasting recovery, however, consumer spending has to be sufficiently strong to convince producers that they need to increase investment. At the same time, high level of private debt and a low-capacity utilization in industry may pose obstacles to an upsurge.
Meanwhile, several emerging markets, notably in East Asia and Latin America, entered into recession, the report notes. Exchange rates, however, have been fairly stable, and some Latin American economies showed signs of recovery towards the end of 2001.
Speaking at a press conference to launch the report at UN Headquarters in New York, Jan Kregel, a senior economic advisor at UNCTAD, said there was very little optimism concerning the possibility of developing countries returning to the kinds of growth rates required to increase their per capita incomes.
UNCTAD usually uses a benchmark of 3 per cent as the global expansion rate required to provide developing countries with the possibility of improving their growth levels, Mr. Kregel said, but the global increase in 2002 would probably not be higher than 2 to 2.5 per cent.