Dollar crash must be averted to sustain global economic growth – UN report

In order for current world economic growth rates to continue, it is crucial to keep the United States dollar from falling rapidly while also avoiding a recession, says a United Nations report released today.

“We call for a coordinated strategy that would think about how to adjust these global imbalances while avoiding recessionary tendencies in the global economy,” Rob Voss, Director of Development Policy and Analysis at the UN Department of Economic and Social Affairs (DESA), told reporters as he launched the report at UN Headquarters.

According to the report, the World Economic Situation and Prospects mid-year update, the world economy is still strongly tied to US fortunes, and the slowdown in the country’s housing market is already a major factor in slowing world growth to 3.4 per cent for 2007, down from the 4 per cent achieved in 2006.

Growth in other developed economies, such as Europe and Japan, remains strong, but their role is limited as major engines of global growth, the report says.

The report says the performance of the world economy over the past few years was remarkably broad-based, with 96 out of 159 countries for which data was available increasing per capita output by 3 per cent or higher.

Robust growth was experienced not only in East Asia, which zoomed above 8 per cent in 2006, but also in countries of the former Soviet Union, Africa and Latin America and the Caribbean.

Growth in all regions is expected to moderate in 2007 and to stabilize in 2008, barring a major decline of the dollar, the report projects.

Unfortunately, however, the report notes that even continued growth does not guarantee achievement of the Millennium Development Goals (MDGs), the targets for reducing extreme poverty by 2015, because 44 individual countries, many in Africa, failed to achieve growth of over 3 per cent, despite the regional average.

In addition, in many developing countries growth has been fuelled by exports of commodities, such as oil, and not increased employment, according to the report.

“In order to meet the Millennium Development Goals, there’s a major policy challenge to improve the employment effects of the positive growth we see around the world,” Mr. Voss said.