UN: Developing countries face years of difficulty as global economy slows
UN Trade and Development Conference expects global growth to slow in 2023 to 2.1%, calls for bold economic agenda to counter trend
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The United Nations Trade and Development Conference (UNCTAD) warned on Wednesday that developing countries face years of difficulty as the global economy slows amid heightened financial turbulence.
"UNCTAD expects global growth in 2023 to drop to 2.1%, compared to the 2.2% projected in September 2022, assuming the financial fallout from higher interest rates is contained to the bank runs and bailouts of the first quarter," said the UN agency.
During the ongoing World Bank-IMF spring meetings in Washington DC, UNCTAD called for "a bold international economic agenda" to avert another lost decade for developing countries.
The UN agency said developing nations face a projected foregone income of $800 billion and battling unprecedented debt distress.
Global growth is expected to be lower than earlier projected, signaling a potential economic downturn, according to UNCTAD.
"Developing countries face mounting debt and insufficient international support, risking another lost decade," said UNCTAD.
"The banking crisis highlights long-neglected financial fragilities and regulatory weaknesses," said the agency following bank failures or problems in both the United States and Switzerland.
Declining energy costs lead to lower inflation, but elevated food prices maintain a high cost of living in many developing countries.
Growing global asymmetries threaten developing countries' resilience, requiring more decisive multilateral action and an urgent focus on sovereign debt architecture.
"Achieving price stability without sacrificing growth has remained a challenge for policymakers in most advanced economies," says the report.
In the final quarter of 2022, with inflationary pressures still entrenched, central banks continued to hold to strict inflation targets and tighten monetary policy to squeeze any "excess demand" out of the economy.
The report noted that the US Federal Reserve System (Fed) raised rates by 175 basis points and the European Central Bank (ECB) by 225 basis points, from a lower starting point, over the final three months of 2022, with similar moves by other leading central banks.
"This happened despite mounting evidence that pointed away from excess demand and to supply-related problems," said UNCTAD.
"Calls were voiced for a new monetary normal around a higher inflation target, which would ease the restrictive pressures on the Fed and the ECB, without sacrificing too much in terms of efficiency and price volatility," said the UN agency.
UNCTAD is the UN's leading institution dealing with trade and development. It is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
UNCTAD is part of the UN Secretariat and has a membership of 195 countries, one of the largest in the UN system. The agency supports developing countries to access the benefits of a globalized economy more fairly and effectively.
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