South Asia boom, new Trump initiatives are the good news for sagging global economy
UNITED NATIONS — Modest global economic recovery is expected, but a return to robust and sustained growth remains elusive, according to the World Economic Situation Report, the UN’s barometer of international economic trends.
The current survey states that while the world economy grew by a a modest 2.2 percent in 2016, this was the slowest expansion rate since the 2009 Recession. Though growth prospects for the new year are modestly better, the yet to be determined effects of the new U.S. administration’s economic and trade policies as well as the aftershocks of Britain’s BREXIT remain unknown.
The Report adds that while moderate improvement is expected for 2017, this “is more an indication of economic stabilization than a signal of a robust and sustained revival of global demand.”
“Weak investment has been at the foundation of the mediocre global economy,” the survey warns.
The U.S. economy is expected to “have expanded at a modest pace of 1.5 percent in 2016.”
Last year’s tepid growth was the lowest since 2010. While the study cautions that uncertainties concerning trade, monetary, fiscal, environmental and foreign policy prospects “have increased the margin of uncertainty,” the survey adds, “a rise in infrastructure spending could accelerate growth in the United States in 2018.”
GDP growth in Japan was expected to improve modestly to 0.9 percent in 2017; growth was 0.5 percent last year. “Economic activity in Europe will remain subdued, with growth expected to stay at 1.8 percent for the EU from 2016 to 2018,” the survey says and warns that the United Kingdom growth rate of 2 percent in 2016 is expected to fall to 1.1 percent this year. Greece is expected to lift last year’s negative growth of 0.3 percent to a robust gain of 1.7 percent this year, the first sizable uptick in nearly a decade.
While East Asian expansion has moderated to 5.5 percent, China still shows impressive numbers at 6.6 percent in 2016 with a slight decrease for 2017. South Korea’s growth improved moderately to 2.8 percent. The survey adds that both Hong Kong and Taiwan “are estimated to have experienced the slowest growth among the largest economies in the region in 2016.” Hong Kong grew by 1.4 percent while Taiwan reached only 0.9 percent.
South Asia remains the world’s fasted developing region the report stresses, with India reaching an impressive 7.6 percent growth last year and 7.7 percent slated for this year. Pakistan’s growth is expected to “remain robust, above 5 percent.”
Given the fall in petroleum prices and continuing economic sanctions, Russia’s growth remains negative 0.8 percent last year and is expected to reach only 1 percent this year. Ukraine’s 2016 growth reached an anemic 0.8 percent but is expected to reach 1.9 this year.
The World Economic Situation Prospects laments that GDP growth in the least developed countries is projected “to remain well below the Sustainable Development Goals (SDG’s) target of at least 7 percent.”
As UN Secretary General Antonio Guterres told global grandees assembled in Davos, “Without the private sector, we will not create enough jobs, we will not bring enough dynamism and stability to the societies that need to be enhanced with the implementation of the Sustainable Development Goals.”
Equally poor growth in the Caribbean and Latin America over the past few years has turned around slowly. Oil rich but stubbornly socialist run Venezuela has hit negative 8 percent growth last year and this year is expected to moderate to minus 3.7 percent.
The Report underscores weak investment as a major cause of the slowdown in global growth.
Secretary General Guterres stressed, “Without the private sector we will not have the necessary innovation, we will not have the necessary capacity to discover new markets, new products, new services and to be able to develop new areas in the economy. ”
Countering conventional wisdom, the new Trump Administration in the U.S. has been able to cajole manufacturers to keep industrial jobs in the USA and moreover been able to attract major high tech investments.
Foxconn a major Taiwanese electronics firm, is weighing whether to build a $7 billion display screens plant in the U.S.
Given that the U.S. is the second largest market for televisions, the Foxconn investment could create between 30,000 and 50,000 American jobs.
Earlier Japan’s SoftBank, a major technology and information company, pledged to invest $50 billion in the USA.
Though the private sector plays a powerful if not the dominant role in job creation, nurturing the conditions and policy to encourage entrepreneurial investment and growth remains paramount.
John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism the Diplomacy of Separated Nations: Germany, Korea, China (2014). [See pre-2011 Archives]