Global economic growth and trade will slow this year and the euro crisis is a major threat to even maintaining the sluggish performance, the United Nations warned yesterday.
The UN World Economic Situation and Prospects mid-year update warned that an escalation of the sovereign debt and bank debt crises in Europe will cause “severe turmoil” on financial markets.
The UN experts revised down their forecasts for the world economy to 2.5 percent growth this year and 3.1 percent in 2013 after growth of 2.7 percent last year. The report said that governments imposing austerity, while many simultaneously battle the debt crises, are hitting demand, investment and growth prospects.
“Clearly, the efforts at regaining debt sustainability through fiscal austerity are backfiring,” it warned. “Developed countries, especially in Europe, are struggling to break this vicious cycle.”
The report gave a “less somber view” of the US economy. It said job creation has exceeded expectations and consumer spending has increased markedly. It predicted growth of 2.1 percent this year and 2.3 percent in 2013, up from the last forecast and a rise from the 1.7 percent recorded in 2011.
World trade growth will slow to 4.1 percent this year, down from 13.1 percent in 2010 and 6.6 percent in 2011, the UN estimated.
It also said that the global jobs crisis is worsening, particularly in the euro zone.
“Employment-to-population ratios remain below their 2007 levels in all major economies, except Brazil, China and Germany.”
The unemployment rate in the 16-country euro area as a whole increased to a historic high of 10.9 percent in March, up one percentage point from a year ago.
By contrast, post-crisis employment rebounded more strongly in developing countries, especially in East Asia and Latin America.
The UN report called for an internationally coordinated change of course “from short-term consolidation to robust economic growth with medium- to long-term fiscal sustainability.”
Global growth to slow in 2012: UN
