PRESS BRIEFING BY UNDER-SECRETARY-GENERAL, DEPARTMENT OF ECONOMIC AND SOCIAL AFFAIRS, LAUNCHING REPORT ON WORLD ECONOMIC SITUATION

PRESS BRIEFING BY UNDER-SECRETARY-GENERAL, DEPARTMENT OF ECONOMIC AND SOCIAL

AFFAIRS, LAUNCHING REPORT ON WORLD ECONOMIC SITUATION

After growth of less than 2 per cent for over two years, world economic growth was expected to accelerate to 3.5 per cent this year, according to the report “World Economic Situation and Prospects 2004”, jointly prepared by the United Nations Department of Economic and Social Affairs (DESA) and the United Nations Conference on Trade and Development (UNCTAD).

Launching the report at a Headquarters press briefing this morning was Under-Secretary-General for Economic and Social Affairs José Antonio Ocampo, who was joined by Ian Kinniburgh, Director of DESA’s Development Policy and Planning Office, and Harris Gleckman, Chief of UNCTAD’s New York office.

World economic growth, stated Mr. Ocampo, had gained momentum last year and was expected to strengthen in 2004, with the United States leading the way.  The recovery of the Japanese economy had been a pleasant surprise last year.  While European economies were lagging behind, signs of a modest upturn were emerging.  Transition economies were growing relatively fast in 2003 and were already in a process of recovery.  The Baltic economies were growing the fastest and continued to be the leaders this year, followed by the Commonwealth of Independent States (CIS) countries and by the new Central and Eastern European members of the European Union.

Turning to the developing world, he noted that growth in some areas had been fast, and that was expected to continue, such as in South and East Asia.  In other areas, the situation had not been so good, particularly in Latin America.  But growth in all areas was expected to be on the rise.  In Africa, that growth could be attributed to strong agricultural output and good macroeconomic policies.  While growth in Africa might exceed 4 per cent, that would still not be enough to meet the Millennium Development Goals, for which a 7 to 8 per cent growth rate was required.

East Asia had recovered from the SARS shock and had tried to continue to be a source of growth, he said.  There had been sharp growth in South Asia, especially in India, which was expected to continue.  In Western Asia, prospects would depend very much on the situation in Iraq, as well as on oil prices.  The recovery of Argentina was the major news last year in the Latin American and Caribbean region.  At the same time, the region’s two largest economies, Mexico and Brazil, did not do so well but were expected to do better in 2004.

While noting that inflation had remained low in most countries of the world, the report stressed that the unemployment situation of many countries remained a more delicate issue due to the accumulated effect of recession or slow growth.  Several economies were experiencing a process of recovery in which employment was lagging significantly behind.  There was still room for growth without risking inflation.

The international environment, Mr. Ocampo stated, was characterized by significant improvement last year with, among other things, the return of capital to transitional and developing countries.  On average, there had been an improvement of over $30 billion in net capital for developing economies last year.  Also, commodity prices had improved, more so in the case of minerals and raw materials.  Oil prices had been relatively high but were expected to moderate this year.

World trade continued to recover from the recession experienced in 2001 and would continue to do so this year to a level of around 7.5 per cent, he said.  While that was positive news, that recovery was not expected to be as strong as that which had characterized the late 1990s.  A major issue had been the growing role of China as a major trading hub.  It was very rapidly becoming a more important centre for trade for several economies in Asia, particularly for the Republic of Korea and Japan.

In the short-term, he noted, policy stimuli by all industrialized market economies were essential for the recovery of the world economy.  The United States had produced the greatest stimulus, while the European area had been more moderate.  It was also noted that global imbalances had been accumulating for several years, reflected in the large trade deficit of the United States countered by the large surpluses of Japan and Europe.  That situation was expected to increase in 2004.  The United States trade deficit was expected to grow further.

Turning to priorities for trade negotiations, Mr. Ocampo emphasized that the Doha work programme must be quickly brought back on track after the setback of Cancun.  The broad participation of developing countries in the negotiations was welcomed.  He also emphasized the need to keep development as a central topic on the agenda.  The proliferation of regional and bilateral free trade agreements were second-best solutions, and a multilateral approach was preferable.

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