"The road to recovery from the Great Recession is
proving to be long, winding and rocky," said an annual UN survey,
"World Economic Situation and Prospects 2011."
"After a year of fragile and uneven recovery, growth of
the world economy is now decelerating on a broad front, presaging weaker global
growth in the outlook."
The report forecast that, after a better-than-expected rate
of 3.6 percent this year, the world economy's growth would slow to just 3.1
percent next year — slightly less than a mid-year UN review predicted in May —
and 3.5 percent in 2012.
The projections were broadly in line with those issued in
the past two months by the International Monetary Fund and the Organization for
Economic Cooperation and Development, which both forecast a 4.2 percent rise
next year.
UN economists said the discrepancy with the UN figures was
mainly accounted for by different ways of calculating exchange rates.
The report said US economic growth was expected to be 2.3
percent next year — a drop of 0.3 percent on its May forecast — after 2.6
percent this year. Growth would be still weaker in the euro zone at 1.3
percent, and Japan at 1.1 percent.
The recovery will continue to be driven by developing
countries — led by China, India and Brazil — which had contributed to more than
half of global expansion since late 2009, the UN report said. But even their
growth was expected to slow to around 6 percent over the next two years.
Tax hikes and spending cuts were also worsening the
employment situation, it said. Saying at least 30 million jobs had been lost
worldwide due to the financial crisis, it predicted that it would take some
five years to restore them.
Weaknesses in developed economies, including sluggish growth
in the United States and debt crises on the periphery of Europe, were dragging
down the global recovery and posing risks for world economic stability, it
said.
"There will be no quick fix for the problems these
economies are still facing in the aftermath of the (2008) financial
crisis," it said.
The report implicitly faulted nations that have dropped
stimulus packages in favor of slashing budgets. "As governments shift from
fiscal stimulus to austerity, the recovery process is being placed in further
jeopardy," it said.
Repeating long-standing UN calls for more international
coordination of economic policy, the report urged more stimulus "to
reignite the global economy." Its cost would be "low relative to the
growth risk of fiscal consolidation," it said.
The report also queried the policy of "quantitative
easing" — or pumping money into the economy by buying government debt. The
US Federal Reserve announced a program on Nov. 3 to buy $600 billion in
government bonds by mid-2011.
"Further quantitative easing and a further depreciation
of the dollar could be a way for the United States to try to inflate and export
its way out of its large foreign liability position," the report said.
"But it could more likely risk disruption of trade and financial
markets."
On the positive side, the report said inflation was likely
to remain low around the world for the next two years, except in a few Asian
economies, while world trade continued to recover in 2010, although momentum
slowed in the second half.
Global oil demand was expected to increase further next
year, but at a more moderate pace, with most of the demand growth continuing to
come from emerging economies, especially China and India, it said.
