The global economy is slowly rebounding from the worst of the recession but the recovery remains too anaemic to create enough jobs to replace those lost so far, a new United Nations report says today.
The updated 2010 World Economic Situation and Prospects, released by the UN Department for Economic and Social Affairs (DESA), finds that world gross product started to grow again in the early months of this year after it contracted by 2 per cent last year amid the most severe international recession since World War Two.
The report predicts that the global economy will grow by 3 per cent this year and then by another 3.1 per cent next year, thanks in part to fiscal stimulus packages and expansionary monetary policies introduced by governments worldwide.
Household consumption and business investment are both showing tentative signs of revival and international trade is also on the increase again, although still below its pre-crisis peak.
But the pace of the recovery remains subdued and “far from sufficient to recuperate the job losses and close the output gap created” during the recession, according to the report’s authors.
“There’s good news and there’s bad news,” Rob Vos, Director of Development Policy Analysis in DESA, told reporters as he presented the report. “The good news is that the crisis in the real economy has abated and we see continued recovery, but at the same time it’s weak and uneven.
“The bad news is that there’s continued downside risks to this outlook which may lead us to mediocre growth prospects for the coming years,” he added.
The report notes that the global economy still contains important weaknesses, with credit flows to non-financial sectors remaining relatively weak, especially in some wealthier industrialized nations. The public finances of some developed countries, such as Greece, Portugal, Spain and Ireland, have also deteriorated.
“Facing elevated unemployment rates, soaring public debt, and limited credit flows, growth prospects for most developed economies remain lacklustre, unable to provide sufficient impetus to the global economy,” the report states.
The world’s developed economies are expected to collectively grow by only 1.9 per cent this year and 2.1 per cent in 2011, with countries in the so-called Euro zone struggling most of all.
The report adds that “while developing Asia, particularly China and India, is leading the way among developing countries, the recovery is much more subdued in many economies in Africa and Latin America.”
China and India are forecast to grow this year by 9.2 per cent and 7.9 per cent respectively, for example, whereas the economy of sub-Saharan Africa is expected to enlarge by 4.7 per cent and the Caribbean region by only 2.1 per cent.
Unemployment rates, already at historic highs in many countries, are unlikely to budge. The number of jobless people worldwide rose by at least 34 million last year, and the number of working poor soared by 215 million as many people took lower-paid jobs
“At the present rate of recovery, it is expected to take at least four or five years to bring unemployment rates down to pre-crisis levels in most developed countries,” according to the report.
“In many developing economies informal sectors may continue to expand as firms postpone hiring.”
The report’s authors warn that “the risk of a protracted period of mediocre growth” remains high, and they urge policymakers to strengthen support for job-generation schemes.
“A robust recovery in jobs is crucial to a recovery in effective demand, which in turn will help reduce budget deficits.”
The report also stresses the need for greater international policy coordination to ensure that some countries and sectors are not disadvantaged and can all contribute to a more sustained global economic recovery.