PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR ECONOMIC AND SOCIAL AFFAIRS

Press Briefing

PRESS BRIEFING BY UNDER-SECRETARY-GENERAL FOR ECONOMIC AND SOCIAL AFFAIRS

The brunt of the world economic slow-down had been borne by the developing and transition economies, according to a United Nations report, The World Economy in 1999. At a Headquarters press briefing this morning, Nitin Desai, Under-Secretary-General for Economic and Social Affairs, described the period 1998-99 as a lost biennium for development in Asia and a period of lost momentum in Africa and Latin America.

Introducing the report, prepared by the Department of Economic and Social Affairs, Mr. Desai said that in the year 2000, the Asian economies affected by the financial crisis would be starting to grow from where they had left off in 1997. While financial markets had stabilized, and despite clear signs of recovery in Asia, there was continued weakness in the Commonwealth of Independent States (CIS) countries and in Latin America.

The World Economy in 1999 was a mid-year assessment of the world economy which would constitute the first chapter of this year's World Economic and Social Survey, Mr. Desai said. It was one of the main documents on the agenda of the 5 July high-level meeting of the Economic and Social Council to be held in Geneva.

He said that according to the report, there had been 39 developing countries with gross domestic product (GDP) per capita growth exceeding 3 per cent in 1996, compared to just 13 in 1999. Thirty-two developing countries would suffer a decline in GDP per capita next year as against just 14 in 1996. Translated into population affected, the picture was even more dramatic; while there had been 160 million people in countries with declining per capita output in 1996, about 1.2 billion would be in those countries next year.

The reason for that, he said, was that although the economies of North America and Europe had maintained their growth, trade volume had only grown by 3.5 per cent and the value of trade had actually declined in 1998. The picture would be even worse if one looked at the developing countries in terms of income rather than output due to fallen commodity prices. Also, net transfer of financial resources from developing countries was almost $60 billion in 1998, compared to positive flows of about $35 billion in the first half of the 1990s.

Mr. Desai said the overall picture for the developing world had been distorted by the fact that the two largest developing countries -- India and China -- had not experienced a slow-down. If the two were excluded from the developing-country total figures, the picture looked extremely bleak. What the slow-down had done, he said, was basically to stop the signs of revival of growth seen in sub-Saharan Africa during the early 1990s and in the

Briefing by USG for Economic and Social Affairs - 2 - 1 July 1999

Commonwealth of Independent States countries in the mid-1990s. That setback was taking place at a time when those countries had put extensive policy reforms in place.

The world was undergoing a period of slow growth at just 2 per cent in 1998 and 1999, the Under-Secretary-General said. Only continued growth in North America and Europe had kept the world economy going, while Japan had remained in recession. Continued slow growth was expected for next year.

Mr. Desai stressed the importance of a coordinated policy response to crisis situations rather than expecting the crisis economies to undertake the bulk of adjustment actions. The world economy would be easier to manage if some of the adjustment actions were undertaken by the non-crisis economies. There was an advantage in coordination, and at the same time, coordination must include developing countries and not just the Group of Seven.

A correspondent asked how long it would take for living standards and social conditions to recover in countries affected by the Asian financial crisis.

The Under-Secretary-General replied that while there were signs of recovery in Asia, much of the impact on living standards in Thailand and the Republic of Korea had resulted from unemployment. That would require a revival of the growth process in order to reabsorb the unemployed. In Indonesia, much of the impact had been a result of inflation and a very sharp increase in prices. That would require a lowering of inflation rates -- a scenario the Department considered unlikely before the year 2000.

In Latin America, he said, there was still no clear evidence of a revival of growth. In fact indications in the last few days had been even more pessimistic than the projections contained in The World Economy 1999. In Africa, there had been signs of growth in the 1990s, but the 5 per cent growth seen between 1991 and 1996 had now come down to about 3.5 per cent, or virtually no growth in per capita terms.

Ian Kinniburgh, Director of the Development Policy Analysis Division of the Department of Economic and Social Affairs, also present at the briefing, told another correspondent journalist that while both Australia and New Zealand had been severely hit by the fall in primary commodity exports, the latter had suffered a far more widespread slow-down in demand from Asia. New Zealand had not adjusted as effectively as Australia, which had freed its exchange rate. The Asian shock had been less well absorbed by the small New Zealand economy than by the large and more flexible Australian one.

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