The world economy faces serious challenges in sustaining the strong economic growth of the last few years in 2008, the United Nations said in World Economic Situation and Prospects 2008 released Wednesday in New York.
The baseline forecast of the United Nations is for world economic growth to moderate to 3.4 percent this year, following the trend line down from 3.9 percent in 2006 and 3.7 percent in 2007.
But there is a clear and present danger of the world economy coming to a near standstill, the annual report warned.
In the second half of 2007, the bursting of the housing market bubble in the United States and the unfolding credit crisis have induced uncertainty across global financial markets. This together with the decline of the U.S. dollar and the unresolved problem of the large global imbalances could combine to further drag world output down.
To prevent this from happening, the United Nations advised concerted international policy action to address the global imbalances and calm currency markets.
During 2007, world economic growth was robust and notably broad-based. More than 100 economies achieved 3 percent growth of per capita output or more.
Developing country growth averaged nearly 7 percent. Remarkably, economic growth in Africa strengthened in 2007 to near 6 percent, and in the baseline scenario this pace is expected to accelerate to over 6 percent in 2008. However, this economic fortune may reverse. The major uncertainty for 2008 now emanates from the U.S. economy.
A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years, said the report.
The ongoing housing downturn in the United States became much more serious in the third quarter of 2007, with the meltdown of sub-prime mortgages triggering a full-scale credit crunch that reverberated throughout the global financial system.
Central banks of the major economies have adopted various measures to attenuate financial stress. But these actions do not address the root causes of huge imbalances between financial surplus nations, such as China, Japan and the major oil producers, and the deficit countries, the United States in particular.
These imbalances need to be addressed, the United Nations suggested, through economic stimulus in the surplus countries to offset the effects of demand deflation in the United States.
The annual report is a joint product of U.N. Department of Economic and Social Affairs, U.N. Conference on Trade and Development and the five U.N. regional commissions. It provides an overview of recent global economic performance and short-term prospects for the world economy and of some key global economic policy and development issues.
(Xinhua News Agency January 10, 2008)
