US mortgage crisis, rising prices spell financial turmoil – Assembly president

14 February 2008
Srgjan Kerim, President of the 62nd session of the General Assembly

The sub-prime mortgage market collapse in the United States, rising oil and commodity prices and other factors could combine to hamper the economies of developing countries, the President of the United Nations General Assembly said today.

Srgjan Kerim recalled that in the last quarter of 2007, macroeconomic and fiscal management had improved in many developing countries, creating higher savings, investments and consumer demand. Expenditures on social programmes went up while extreme poverty went down – but globally inequality was still rising, he said.

“Since then, the fall-out from the collapse of the US sub-prime mortgage market has spilled over into global equity and bond markets, eroding confidence in the financial system,” Mr. Kerim told the Assembly.

“In addition, high oil and commodity prices, particularly in the agricultural sector, and rising global imbalances are storing up inflationary pressures.”

Mr. Kerim made his comments as the General Assembly began the first of six review sessions on the “Monterrey Consensus,” a 2002 agreement by which developing countries took primary responsibility for mobilizing domestic resources and developed countries agreed to promote an environment conducive to this effort.

The Assembly President warned that the ongoing financial turmoil could reduce “demand in developed countries with significant spillovers into emerging markets and developing countries.”

At the same time, he noted that markets in developing counties have continued to expand. “Overall, developing countries have benefited from strong domestic demand, better governance, more disciplined economic management, and in the case of commodity exporters, from high food and energy prices.”

But he said that unless growth is translated into human development that creates opportunities and benefits for all, “growing inequality and the sheer scales of global poverty will create destabilizing economic and political pressures in many countries.”

Addressing climate change is central to ensuring sustainable economic development and poverty reduction, he said, adding that “its policy implications also embrace issues of equity, ethics, human rights and security.”

The Financing for Development process “has a special responsibility to support those countries most affected to adapt to climate change; and, to create incentives for investment in climate-friendly energy production, energy efficiency and new technologies to ensure that all the Millennium Development Goals (MDGs) are met – not at the cost of economic growth, but to achieve it.”

The Assembly’s meeting is being held in preparation for the conference to review the implementation of the Monterrey Consensus, to be held in Doha, Qatar, toward the end of this year.

 

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