PRESS BRIEFING LAUNCHING WORLD ECONOMIC AND SOCIAL SURVEY 2003
Press Briefing |
PRESS BRIEFING LAUNCHING WORLD ECONOMIC AND SOCIAL SURVEY 2003
The economic recovery forecast one year ago for the second half of 2002 had been delayed by geopolitical developments, Ian Kinniburgh, Director of the Development Policy Analysis Division, Department of Economic and Social Affairs, told correspondents this morning during a press briefing at Headquarters launching the World Economic and Social Survey 2003.
[The World Economic and Social Survey 2003 was simultaneously launched in New York, Geneva and Santiago, Chile.]
The uncertainties around the pre-Iraq invasion situation were the main factors in derailing the economy, he said. Now that those uncertainties had settled, a recovery for the second half of the current year was anticipated. The delay in recovery had imposed costs on the world economy, particularly in developing countries in terms of the long term and achieving the Millennium Development Goals.
The growth rate over the past three years had been below the long-term growth rate trend. He expected a return to the trend rate of growth in the second half of 2004. However, where the growth rate in countries in transition had been contracting in the 1990s, those countries were now growing “rather well”. That factor made the global growth rate even more disappointing.
World trade, an important engine of growth in the ‘90s, had fallen in 2001 and had grown little in 2002, he said. Slow growth of around 4 per cent was expected this year, due largely to geopolitical uncertainties.
Developed countries had seen limited recovery in 2002 from the dramatic slowdown in 2001, he continued. It was expected that the United States, “the engine of growth”, would be the first to recover and would accelerate growth in other countries, due to monetary and fiscal policy stimuli. Consumer demand had always been the mainstay of recovery, but business investments must also recover.
However, there were some dampening factors such as the growing unemployment rate with a negative influence on consumer demand, as well as excess capacity in certain sectors. A rapid recovery was, therefore, not expected, he stated. The situation in Western Europe had been worse in 2002 than in 2001, and the region was not expected to recover as fast as the United States. Germany was now considered to be in recession. For Japan, no rapid recovery was expected, as it was suffering from deflation and still struggling with difficulties in the financial sector. The fact that Australia and New Zealand were doing well was encouraging.
The economies of countries in transition had recovered from their 1990s breakdown and had been largely immune from the current slowdown, he said. Particularly in Eastern European countries, there had been resistance to the slowdown, thanks to, among other things, strong internal demand.
In developing countries, growth in 2003 had been one half per cent less than anticipated, Mr. Kinniburgh said. It would take a while for them to get back to former growth rates. However, the most populous countries, India and China, had achieved high rates of growth, which was important, as those two countries also had the largest number of the world’s poorest people.
In 2002, the slowdown had been greatest in South-East Asia, mainly due to SARS and the slowdown in developed countries, he said. A modest recovery was expected. The Middle East region had suffered a slowdown because of tensions around Iraq and the Israel-Palestine question. A slow recovery was expected.
Africa had done a little better than expected, although the growth rate of 3 per cent was the same as its population growth, he said. Sub-Saharan countries had done better than the North African region, with some 20 sub-Saharan countries achieving rates above the level of 3 per cent. However, that progress was offset by situations of violence.
The Latin American region had not recovered, due mainly to the crisis in Argentina and the slow growth in trade, he continued. There were, however, signs that there was domestic recovery in Brazil. Recovery for the region would be largely dependent on recovery in the developed countries.
In conclusion, he said 2003 was a weak year. The year 2004 would show the road to recovery. Major risks to that recovery were of a geopolitical nature, as terrorist attacks were feared. Factors such as the SARS epidemic also could have global economic consequences. The depreciation of the United States dollar was bad for countries relying on exports to the United States. The past few years had been an inauspicious beginning of the millennium, as growth in developing countries had been offset by population growth. There was a need for international cooperation and long-term stimulus measures.
In response to a correspondent’s questions, he said there were no estimates available on the impact of the weakening dollar. The effects on trade would kick in later, probably in 2004.
The boom in housing prices was not a global boom but confined to English-speaking countries such as the United States, United Kingdom, Australia and New Zealand, he said in reply to another question. The fear was that that boom could not last forever, making decisions about monetary policies difficult. He could not predict when that bubble would burst.
Regarding a question about re-entry of Iraq in the oil market he said the damage in Iraq was not as bad as in an anticipated worst-case scenario. However, Iraqi oil production had not gotten up to speed as fast as anticipated. It would take some time before Iraq would be up to full capacity. Once that happened, it would have an easing effect on world oil prices.
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