Press Conference Launching Global Economic Outlook 2013

 

A fundamental, global shift towards coordinated policies focused on boosting jobs and growth was needed to break a vicious cycle of debt, low growth and high unemployment, United Nations economists said this morning during a Headquarters news conference.

“This time around, we’re not very optimistic about the way things are moving,” said Robert Vos, Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs, as he launched the Global Economic Outlook.  That survey makes up Chapter 1 of the World Economic Situation and Prospects 2013, a joint publication compiled by the Department, the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions.

Pointing to a renewed economic slowdown that was “quite significant” and beginning to extend beyond Europe into emerging economies, Mr. Vos said there was a high risk of a downward spiral towards a new global recession, particularly if the euro zone crisis escalated, the United States fell over “the fiscal cliff” and if emerging economies like China suffered a so-called “hard landing”.

Explaining how a vicious cycle was perpetuated by policy choices, he said that the “accelerator on the monetary side” of policies like quantitative easing was met by a “brake on the fiscal side” in the form of continued fiscal austerity, which helped to maintain a low-growth trap. 

The report emphasised five critical areas for policy action to break out of the vicious cycle and reduce uncertainty, he continued.  It called for coordination of fiscal policy to boost growth, redesign of fiscal and structural policies to boost employment and to accelerate the restoration of lost jobs, coordination of monetary policy to harness capital volatility, reform of the financial sector to tackle financial fragility and the improvement of development finance to help ensure “benign rebalancing” of the global economy and enable developing countries to fulfil the Millennium Development Goals

Also attending the press conference, Assistant Secretary-General for Economic Development, Department of Economic and Social Affairs, Ms. Shamshad Akhtar shared Mr. Vos’s concerns, contending that “irrespective of what we hear on a day to day basis,” there remained “overwhelming concerns” about the state of the economy.

She said that the current report included downward revisions of the growth outlook, even in the light of global policy actions such as the unconventional monetary stimulus in the United States and the outright monetary transaction process in Europe, without which the situation would be much more complicated.  The global recovery depended on implementation of further swift, effective and coordinated policy actions, directed at the restoration of growth and jobs.

Echoing that sentiment, Mr. Vos said that coordinated efforts to boost growth and jobs could “lift all boats”.  Policies that aligned with the report’s recommendations would lead to more benign growth and could cause an employment recovery by 2014, with 33 million more jobs per year potentially being added in developing countries.

Mr. Vos responded to a request for a prediction on the result of the United States failing to negotiate a solution to the “fiscal cliff” crisis by saying that the outcome depended on other counteracting pressures.  He said that the deal currently on the table did not differ too much from what would happen without an agreement.  He added that a compromise, including some of the United States President’s proposals, could work to mitigate some of the worst potential effects, by working to stimulate employment and build infrastructure.

Responding to a question on austerity measures, he recognized that fiscal consolidation and some austerity could have positive effects, but added that now was not the right time for them.  In Europe, where they were particularly prevalent, they were self-defeating.  Although they aimed to boost investor confidence and encourage growth, they were actually failing to encourage growth and were limiting demand.  Rather than combating debt problems, they were actually contributing to them.  He called for a redesign of policies, gearing them more towards promoting economic growth.

Asked about the link between a loss of faith in the financial sector and a perceived lack of accountability, Ms. Akhtar said that the system had been misused for decades.  Turning things around overnight was not possible but multiple efforts under way were attempting to strengthen the financial system and clean it up by introducing stronger accountability and monitoring.

On the issue of BRICS’s [Brazil, Russian Federation, India, China and South Africa] status as the key emerging economies, she responded that they were countries possessing substantial potential, with road maps to success charted out.  However, they also each had home-grown problems.  The crisis had exposed their structural constraints, particularly in the fields of competitiveness and productivity.  In Latin America and India, productivity had been particularly exposed in otherwise apparently strongly performing economies.  She also addressed the efforts of emerging economies to diversify, in particular in Africa, where growth had been driven by investments in natural resources.  It was important that going forward more downstream work was done, she added.

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For information media • not an official record