Photo taken on Oct. 14, 2019 shows the United Nations headquarters in New York. (Photo: Xinhua)
The global growth of 2.5 percent in 2020 is possible, but a flare-up of trade tensions, financial turmoil, or an escalation of geopolitical tensions could derail a recovery, according to the United Nations World Economic Situation and Prospects (WESP) 2020, which was launched Thursday.
In a downside scenario, global growth would slow to just 1.8 percent this year. A prolonged weakness in global economic activity "may cause significant setbacks for sustainable development," including the goals to eradicate poverty and create decent jobs for all. At the same time, pervasive inequalities and the deepening climate crisis are fueling growing discontent in many parts of the world, said the report which was launched at the UN headquarters in New York.
Impacted by "prolonged trade disputes," the global economy suffered its "lowest growth in a decade," slipping to 2.3 percent in 2019. The world, however, could see a slight uptick in economic activity in 2020 if risks are kept at bay, said the report.
East Asia leads growth
In the United States, recent interest rate cuts by the U.S. Federal Reserve may lend some support to economic activity. However, given persistent policy uncertainty, weak business confidence and waning fiscal stimulus, GDP growth in the United States is forecast to slow from 2.2 percent in 2019 to 1.7 percent in 2020.
In the European Union, manufacturing will continue to be held back by global uncertainty, but this will be "partially offset by steady growth in private consumption," allowing a modest rise in GDP growth from 1.4 percent in 2019 to 1.6 percent in 2020.
Despite significant headwinds, East Asia remains the world's fastest growing region and "the largest contributor to global growth," according to the report.
In China, GDP growth is projected to moderate gradually from 6.1 percent in 2019 to 6.0 percent in 2020 and 5.9 percent in 2021, supported by more accommodative monetary and fiscal policies. Growth in other large emerging countries, including Brazil, India, Mexico, Russia and Turkey, is expected to gain some momentum in 2020.
Living standards bad for many
Progress toward higher living standards has stalled for many, said the report.
Africa has experienced "a decade of near stagnation" in per capita GDP and many countries around the world are still ailing from the effects of the commodity price downturn of 2014-2016, which resulted in persistent output losses and setbacks in poverty reduction.
In one-third of commodity-dependent developing countries (home to 870 million people), average real incomes are lower today than they were in 2014. This includes several large countries such as Angola, Argentina, Brazil, Nigeria, Saudi Arabia and South Africa.
At the same time, the number of people living in extreme poverty has risen in several sub-Saharan African countries and in parts of Latin America and Western Asia. Sustained progress toward poverty reduction will require both a significant boost to productivity growth and firm commitments to tackle high levels of inequality.
UN estimates indicate that to eradicate poverty in much of Africa, annual per capita growth of over 8 percent would be needed, compared to the just 0.5 percent average rate over the past decade.
Headline GDP growth misses crucial aspects of sustainability and well-being, noted the report.
Beyond GDP growth, other measures of well-being "paint an even bleaker picture" in several parts of the world. The climate crisis, persistently high inequalities, and rising levels of food insecurity and undernourishment continue to affect the quality of life in many societies.
"Policymakers should move beyond a narrow focus on merely promoting GDP growth, and instead aim to enhance well-being in all parts of society. This requires prioritizing investment in sustainable development projects to promote education, renewable energy, and resilient infrastructure," Elliott Harris, UN chief economist and assistant secretary-general for economic development, said at a press conference for the launch of the report.
Economic growth while limiting carbon emissions is possible by changing the energy mix, said the report.
To combat climate change, the world's growing energy needs must be met with renewable or low-carbon energy sources. This will require massive adjustments in the energy sector, which currently accounts for about three-quarters of global greenhouse gas emissions. If per capita emissions in developing countries were to rise toward those in developed economies, global carbon emissions would increase by more than 250 percent -- compared to the global goal of reaching net zero emissions by 2050.
The urgency of energy transition continues to be underestimated, resulting in short-sighted decisions such as expanding investment in oil and gas exploration and coal-fired power generation. This not only leaves many investors and governments exposed to sudden losses, but also "poses substantial setbacks to environmental targets."
Any delay in decisive action toward energy transition "could double the eventual costs." The transition to a cleaner energy mix will bring not only environmental and health benefits, but economic opportunities for many countries, said the report.
Overreliance on monetary policy
"Overreliance on monetary policy" is not just insufficient to revive growth; it also entails significant costs, including the exacerbation of financial stability risks. A more "balanced policy mix" is needed, one that stimulates economic growth while moving toward greater social inclusion, gender equality, and environmentally sustainable production.
"Amid growing discontent over a lack of inclusive growth, calls for change are widespread across the globe. Much greater attention needs to be paid to the distributional and environmental implications of policy measures," said Harris at the press conference.