The world economy is projected to grow by 2.9% in 2016 and 3.2% in 2017, said a United Nations report released December 10.
The UN’s “World Economic Situation and Prospects 2016” report projects global growth this year at a mere 2.4%, a downward 0.4 percentage-point revision from forecasts presented six months ago.
“The world economy has fallen below forecasts of even six months ago and will grow only modestly over the next two years due to ‘cyclical and structural headwinds,’ including low commodity prices and stagnant investment,” the paper, with its first chapter unveiled, added.
Amid lower commodity prices, large capital outflows, and increased financial market volatility, growth in developing and transition economies has slowed to its weakest pace since the global financial crisis of 2008-2009, it noted.
Given the anticipated slowdown in China and persistently weak economic performances in other large emerging economies, notably Russia and Brazil, the pivot of global growth is partially shifting again towards developed economies.
Global economic growth in the next two years will be supported by generally less restrictive fiscal and still accommodative monetary policy stances worldwide, according to the report.
“The expected timing and pace of normalization of the [United States] monetary policy will help reduce some policy uncertainties and provide impetus to revive investment,” Hamid Rashid, chief of the UN’s Global Economic Monitoring Unit said in presenting the report.
The report identified five major headwinds in the next two years: persistent macroeconomic uncertainties; low commodity prices and diminished trade flows; rising volatility in exchange rates and capital flows; stagnant investment and productivity growth; and a continued disconnect between finance and real sector activities.
Growth in developed economies will gain some momentum in 2016, surpassing the 2% mark for the first time since 2010, the report noted.
Economic growth in developing and transition economies is expected to bottom out and gradually recover, but the external environment will continue to be challenging and growth will remain well below its potential.
“Developing countries are expected to grow by 4.3 percent and 4.8 percent in 2016 and 2017, respectively,” said the report.
“Stronger and more coordinated policy efforts are needed to ensure robust, inclusive and sustainable economic growth, which will be a key determinant for achieving the 2030 Sustainable Development Goals,” said Lenni Montiel, assistant secretary-general of the United Nations Department of Economic and Social Affairs.
