ECONOMIC AND SOCIAL COUNCIL TOLD THAT GLOBAL ECONOMIC RECOVERY STILL NOT SECURE

Economic and Social Council

2003 Organizational Session

2^nd Meeting (PM)                   

ECONOMIC AND SOCIAL COUNCIL TOLD THAT GLOBAL ECONOMIC RECOVERY

STILL NOT SECURE

Council Also Takes Decisions

On Organizational Matters for 2003 Session in July

Global economic recovery had proven to be slower and weaker than many had expected, Ian Kinniburgh of the Department of Economic and Social Affairs told the Economic and Social Council today, as he briefed members on the World Economic Situation and Prospects 2003.  Recovery was still not secure, and there were few encouraging signs.

Also this afternoon, the Council took a number of decisions regarding its 2003 substantive session to be held in July. It approved the provisional agenda for its substantive session of 2003, contained in document E/2003/1 as orally amended, and took note of the list of questions for inclusion in its programme of work for 2004, contained in the same document.

With regard to the working arrangements for its 2003 substantive session, the Council decided that:  the high-level segment should be held from 30 June to

2 July; the operational activities segment from 3 to 7 July; the coordination segment from 8 to 10 July; the humanitarian affairs segment from 11 to 15 July; and the general segment from 16 to 23 July.  The last two dayswould be devoted to conclusion of the substantive session.

The Council decided that the theme for the regional cooperation item would be:  “Development dimensions of trade negotiations:  a regional perspective”.  The theme for the humanitarian affairs segment remained to be decided, and the Council postponed a decision on the theme for the operational activities segment to a later date.  It further decided that its high-level meeting with representatives of the Bretton Woods institutions and the World Trade Organization would be held at Headquarters on 14 April.

The Council also decidedto approve the holding of the second session of the Committee of Experts on Public Administration in New York from 7 to 11 April, as well as its provisional agenda.  Recalling its resolution 2002/40, adopted on

19 December 2002, the Council urged the Secretariat to make efforts to meet the expenditures from within the existing resources.

Finally, the Council decided to include in the agenda of its 2003 substantive session the applications for observer status of two intergovernmental organizations:  the Islamic Development Bank and the Islamic Educational, Scientific and Cultural Organization.  Requests for participation were contained

in documents E/2003/7 and E/2003/9 respectively.  On those two intergovernmental organizations, as well as the request for participation of the Intergovernmental Institution for the Use of Micro-alga Spirulina against malnutrition as contained in document E/2002/3, the Bureau would make a recommendation in due course.

The representatives of Greece (on behalf of the European Union and associated States), Morocco (on behalf of the “Group of 77” developing countries and China), United States and Japan made short interventions.

The Economic and Social Council will meet again on Thursday, 30 January at 10 a.m.

Briefing on World Economic Situation and Prospects 2003

IAN C. KINNIBURGH, Director, Development Policy Analysis Division, Department of Economic and Social Affairs, briefing on the World Economic Situation and Prospects 2003, a publication of the Department of Economic and Social Affairs and the United Nations Conference on Trade and Development (UNCTAD), said the focus of the report was on the world economy and development, particularly the performance and prospects of the developing and transition economies.

He said the world economy was recovering from a severe slowdown in 2001.  The year 2002 had shown a limited recovery.  For 2003, a somewhat accelerated economy was forecast.  China was left out of that overview, as it had been performing consistently well over the last two decades.  Developed countries had performed as expected, as had the transition economies, but developing economies had deteriorated in 2002, a trend that continued in 2003.  According to forecasts, the developed economies would perform more slowly than expected sixth months ago.  The transition economies had shown resilience.  The developing countries were expected to grow by 4.25 per cent.

China and India had performed well over the past three years, as had other Eastern Asian economies.  Western Asia, however, had had a bad 2001 because of a drop in oil-prices, but recovery, although mixed, was expected in 2003.  Given the high poverty level there, Africa was not doing well enough, and South America was expected to have a loss in gross domestic product (GDP) in 2002 and some rebound in 2003.

A benchmark had been developed that said that if GDP per capita did not increase by at least 3 per cent, a long-term impact on poverty could not be made.  In 2002, roughly two-thirds of the world population lived in developing countries that met that criteria.  In 2002, that ratio had dropped to two-fifths.  In 2000, six per cent lived in countries where GDP per capita had fallen.  That figure was forecast to be 9.5 per cent for 2002.

One of the weaknesses in developed countries was a vulnerable consumer demand.  The last years had also shown weak business demand, excess capacity and poor corporate governance, resulting in declining consumer confidence.  Higher oil prices of the last months had had a dampening effect on demand in the developed world.  On the positive side, recovery was stimulated by policy and fiscal measures, and there was some scope for further action in that regard.

The overall weakness in global demand had had a negative impact on developing countries, although the strong growth in China was assisting in the

pick up of global demand.  Non-oil commodity prices continued to be weak, and, particularly, prices for minerals and tropical beverages were lower than in 2000.  Foreign Direct Investment (FDI) levels had fallen for the third consecutive year.  Other forms of capital flow had also fallen off or even reversed, resulting in an outflow of capital from some developing countries.  Developing countries were hampered by limitations on short-term policies.  Signs of strength, however, were improved policies and sounder macroeconomic fundamentals.

International trade had grown by 12 per cent in 2000.  It had however declined in 2001 and had somewhat picked up in 2002.  In 2003, a growth of six per cent in international trade was expected.

Global economic recovery had already proven to be slower and weaker than many had expected, he said.  Currently, there were economic weaknesses in Europe, the United States and Japan.  There could be further sell-offs in equity markets, which would lead to further decline.

Heavy global dependence on the United States made all countries vulnerable, he continued, since economic slowdown in that country could considerably affect the world economy as a whole.  Among major global difficulties were the continuing imbalances of developed countries, including the trade deficit in the United States.  He noted that there had been a considerable change in the direction of the dollar since the report had been drafted.  Another uncertainty was that financial difficulties in a few developing countries could become exacerbated.

The possibility of further conflict in Western Asia could result in the destruction of human and physical capital in the region, which would be an impediment to development for some time.  The costs of that conflict would include short-term relief, long-term relief and nation rebuilding.  For the world economy as a whole, one of the consequences of conflict would be the impact on oil prices.  A short-lived increase would have little impact on oil prices, but a significant, persistent increase would lead to a severe global slowdown.

Further conflict in Western Asia would also affect consumer confidence worldwide, leading to a reduction in the growth of demand, he said.  Conflict in the immediate future would compound existing economic uncertainties, leading to a downside risk for the global economy.

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