Context

Department of Economic and Social Affairs of the United Nations recently released a publication titled ‘World Economic Situation and Prospects (WESP) 2020’.

About

• According to the United Nations World Economic Situation and Prospects (WESP) 2020, impacted by prolonged trade disputes, the global economy suffered its lowest growth in a decade, slipping to 3 per cent in 2019.
• Economic Forecast: The Report states that growth of 5 per cent in 2020 is possible, but trade tensions, financial turmoil, or an escalation of geopolitical tensions could derail a recovery.
  • In a downside scenario, global growth can slow to just 1.8 per cent this year.
• Risks: Prolonged weakness in global economic activity may cause significant setbacks for sustainable development, including the goals to eradicate poverty and create decent jobs for all.
  • Pervasive inequalities and deepening climate crisis are fuelling growing discontent in many parts of the world.
• State of emerging economies: Growth in large emerging countries, like Brazil, India, Mexico, the Russian Federation and Turkey, is expected to gain some momentum in 2020; while progress towards higher living standards has stalled for many.
• Commodity price downturn: Many countries around the world are still ailing from effects of the commodity price downturn of 2014-16, which resulted in persistent output losses and setbacks in poverty reduction.
  • In one-third of commodity-dependent developing countries (home to 870 million people), average real incomes are lower today than they were in 2014.
  • This includes several large countries such as Angola, Argentina, Brazil, Nigeria, Saudi Arabia and South Africa.
• Poverty: The number of people living in extreme poverty has risen in several sub-Saharan African countries and in parts of Latin America and Western Asia.

United States

• Recent interest rate cuts by the US Federal Reserve may support to economic activity.
• However, given persistent policy uncertainty, weak business confidence and waning fiscal stimulus, GDP growth in United States is forecast to slow from 2.2 per cent in 2019 to 1.7 per cent in 2020.

European Union

• In European Union, manufacturing will continue to be held back by global uncertainty, but this will be partially offset by steady growth in private consumption, allowing a modest rise in GDP growth from 1.4 per cent in 2019 to 1.6 per cent in 2020.

East Asia

• East Asia remains the world’s fastest growing region and the largest contributor to global growth.
• Supported by more accommodative monetary and fiscal policies, in China, GDP growth is projected to moderate gradually from 6.1 per cent in 2019 to 0 per cent in 2020 and 5.9 per cent in 2021.

Africa

• Africa has experienced a decade of near stagnation in per capita GDP.
• The number of people living in extreme poverty has risen in several sub-Saharan Africa.
• UN estimates indicate that to eradicate poverty in much of Africa, annual per capita growth of over 8 per cent would be needed, compared to just 0.5 per cent average rate over the past decade.

South Asia

• Slow growth: Regional GDP growth fell faster than the global average, dropping from 5.6 per cent in 2018 to 3.3 per cent in 2019, but was moderated by strong growth in Bangladesh, Bhutan, Maldives and Nepal.
• Reasons: Prospects for some countries in the region are dampened by political uncertainty, extreme weather events, commodity price fluctuations and growing security concerns—and their negative impact on investment and consumer sentiment;
• Problem countries: The economic slump in India, the deepening recession in the Islamic Republic of Iran, and the looming twin fiscal and balance-of-payments crises in Pakistan have affected the outlook for many of the smaller economies in the region.
• Recovery: Economic growth is expected to recover as one-off factors wane and fiscal stimulus kicks in.

GDP – not an adequate measure

• Headline GDP growth misses’ crucial aspects of sustainability and well-being.
• Beyond GDP growth, other measures of well-being paint an even bleaker picture in several parts of the world.
• Policymakers should move beyond a narrow focus on merely promoting GDP growth, and instead aim to enhance well-being in all parts of society.
• This requires prioritizing investment in sustainable development projects to promote education, renewable energy, and resilient infrastructure.

Dealing with the climate crisis

• The climate crisis, persistently high inequalities, and rising levels of food insecurity and undernourishment continue to affect the quality of life in many societies.
• If per capita emissions in developing countries were to rise towards those in developed economies, global carbon emissions would increase by more than 250 per cent – compared to the global goal of reaching net zero emissions by 2050.
• Shift energy mix: Compounding economic slowdown, rising global temperatures and increasing frequency and intensity of weather-related shocks there is urgent need for dramatic shift in the global energy mix.
• This will require massive adjustments in the energy sector, which currently account for about three-quarters of global greenhouse gas emissions.

Need for a more balanced policy mix

• Revisiting reliance on monetary policy: Overreliance on monetary policy is not just insufficient to revive growth; it also entails significant costs, including the exacerbation of financial stability risks.
• Balanced mix: A more balanced policy mix is needed, one that stimulates economic growth while moving towards greater social inclusion, gender equality, and environmentally sustainable production.