UNCTAD REPORT SHOWS GLOBAL SLOWDOWN HAVING VERY UNEVEN IMPACT ON DEVELOPING WORLD

UNCTAD REPORT SHOWS GLOBAL SLOWDOWN HAVING

VERY UNEVEN IMPACT ON DEVELOPING WORLD

(Reissued as received.)

GENEVA, 2 October (UNCTAD) -- The 3.3 per cent average growth rate for all developing countries in 2002, although better than the previous year, was still well below the 5 per cent figure for the 1990s.  But the big feature is the regional variation.  In its Trade and Development Report 2003, released today, UNCTAD points out that different developing regions and countries are not only vulnerable to different external shocks, they are also unequally prepared to deal with the increasingly volatile economic conditions that characterize today's globalizing world.

Despite the persistence of weak global demand and SARS, Asian economies picked up strongly this year, largely because their macroeconomic and balance-of-payment positions allowed for more expansive monetary and fiscal policies.  According to the Report, “the expansion of domestic demand in the major economies of the region has provided an independent momentum to growth, which has been further supported by regional integration and the expansion of intraregional trade”.  Although the SARS outbreak will likely take its toll this year, and currency movements have introduced an additional layer of uncertainty over future prospects, the region is expected to top the developing-country growth table in 2003 and beyond.

The growth contraction that hit Latin America in 2002 should be reversed this year, the Report predicts, although much still rides on overcoming the fragility of the Brazilian economy.  Because most economies are still facing stringent payment positions, only a few countries are able to respond to weak global demand with expansionary policy measures.  “In these countries the global downturn aggravated external financial difficulties, and macroeconomic policy has focused on reducing current-account deficits and reassuring financial markets”, says the UNCTAD report.  As a consequence, domestic demand has been shaped by pro-cyclical monetary and fiscal policies.  Recovery is likely to be weak even where short-term capital flows have been attracted by a combination of favourable political conditions and arbitrage profit opportunities.  And, as in the past, a continuation of slow growth, along with appreciating currencies in the wake of these inflows, could trigger their sharp and sudden reversal.

In Africa, where climatic and political factors have a major impact on economic performance, the global slowdown appears to have had only a mild effect.  Still, with continued weakness of many commodity prices expected over the coming years, the Report sees little likelihood that the region will exceed its performance of the past two years, and only a handful of countries appear likely to experience rates of 7 per cent or above.  Under these circumstances, achieving the Millennium Development Goals will be a difficult task.

Output growth in transition economies last year was a respectable 4 per cent, thanks to an expansion of domestic demand (especially private consumption), spurred by capital inflows in the Eastern European countries that are candidates for European Union membership, and by high oil revenues in several CIS economies.  However, growth has not been accompanied by an easing of the external constraint, and remains dependent on capital inflows.  "This is a combination that has frequently been a prelude to financial instability in Latin America", the Report warns.

GDP growth in selected developing and transition economies, 1990–2003 (Percentage change over previous year)
				2003 forecast
Region/economy	1990– 2000	2001	2002	FUGI	EIU	IMF
Developing economies	4.8	2.4	3.3	3.5	.	5.0
Latin America	3.3	0.3	-0.8	1.5	1.6	1.5
Africa	2.9	3.4	2.9	2.5	.	3.9
Asia	6.0	3.3	5.4	4.4	.	6.3
China	10.3	7.3	8.0	7.1	7.6	7.5
Transition economies	-2.5	4.6	4.0	3.6	3.7	4.0
Source:     UNCTAD secretariat calculations, based on World Bank, World Development Indicators, 2003; EIU, Country Forecast, various issues; IMF, World Economic Outlook, April 2003; FUGI Global Modelling System (FGMS), Centre for Global Modelling, Tokyo; and national sources.

                The Trade and Development Report, 2003 (Sales No. E.03.II.D.7, ISBN ISBN 92-1-112579-0) may be obtained at the price of US$ 39, and at a special price of US$ 19 in developing countries and countries in transition, from United Nations Publications, Two UN Plaza, Room DC2-853, Dept. PRES, New York, NY 10017, USA; tel: +1 800 253 9646 or +1 212 963 8302, fax: +1 212 963 3489, email: publications@un.org, or Section des Ventes et Commercialisation, Bureau E-4, Palais des Nations, CH-1211 Geneva 10, Switzerland, tel: +41 22 917 2614, fax: +41 22 917 0027, email: unpubli@unog.ch, Internet: http://www.un.org/publications.

Contact:  Press Office, +41 22 907 5828, press@unctad.org, www.unctad.org/press, or H. Flassbeck, +41 22 907 5840, heiner.flassbeck@unctad.org.

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