Special to WorldTribune.com
UNITED NATIONS — “Economic activity in the world economy remains lackluster, with little prospect for a turnaround in 2016,” cites the gloomy prognosis by the World Economic Situation and Prospects Update for 2016.
The UN survey cautions that weak global growth “continues to linger,” posing a serious challenge for governments and economies.
World gross domestic product is only expected to grow by 2.4 percent in 2016. The tepid expansion reflects what the survey calls “low investment, low commodity prices and financial market turbulence.” It adds “bleak prospects have been compounded by severe weather related shocks, political challenge and large capital outflows in many developing regions.”
Hardly a sunny forecast, as the world economy is facing severe drought-related agricultural losses from the cyclical El-Nino weather effect as well as major setbacks in commodity prices.
But besides bad weather we see that in the developed economies “the momentum of growth has slowed significantly.” In the United States GDP growth is expected to reach only 2.2 percent in 2016 but remains fragile. The survey states, “The revival of business investment in the United States lost momentum last year culminating in a sharp drop in the final quarter of 2015.”
Japan still experiences tepid economic conditions with GDP growth a mere 0.5 percent. Despite its lackluster performance last year, Japan’s economy grew impressively at 1.7 percent in the first quarter of this year. The report warns that should the government increase a consumption tax from 8 to 10 percent, “Japan could fall back again into recession in 2017.
European Union economies are expected to expand by 1.9 percent this year and 2 percent next year, but here again growth varies widely among the 28 member states with Germany’s economy still the EU locomotive at 1.5 percent growth.
East Asia again gets among the best marks with regional growth pegged at 5.5 percent this year. Mainland China’s economic deceleration has taken its toll; Beijing’s once dizzying growth rates have tempered to 7.3 in 2014 and 6.4 percent expected this year. Not only has China’s economy precipitously slowed but the knock on effect has been felt especially among commodity exporters in Africa and Latin America.
Given Taiwan’s growing dependence on the Chinese market for exports, a slowing Mainland economy has hampered Taiwan’s growth which has been lowered to 1.8 percent for 2016.
Yet, Mainland China’s trade with the U.S. continues to surge with a $366 billion trade deficit favoring Beijing last year alone!
South Asia gets good economic grades with the region expected to reach 6.6 percent growth this year. India’s economy is showing robust expansion with 7.3 percent expected this year.
The African continent is slipping and the survey advises “economic growth in Africa continues to lose momentum.” Shortfalls in commodity prices and lessening demand from China has put a damper on overall growth only expected to reach 2.8 percent this year, a steep drop from the average 6 percent per annum a decade ago. Besides the slide in commodity prices, the effects of El Nino weather patterns have seen severe drought sweep regions in East Africa.
Significantly in per capita income terms, the slowdown in GDP growth in many developing regions is particularly stark. In Africa, per capita growth is expected to average just 0.4 per cent during 2015-2017.
“The economic prospects for Latin America and the Caribbean have deteriorated notably over the past six months as the region felt the impact of lower commodity prices,” the World Economic Situation states. Brazil, a regional powerhouse is mired in both a deep recession and a widening political corruption crisis causing growth to fall from minus 3.8 percent last year to minus 3.4 percent this year. Argentina, on the other hand, has seen the return of pro-business government which will hopefully reverse the shortfalls of the previous socialist administration.
Russia continues to stagnate due to the fall in petroleum prices as well as Western economic sanctions slapped on Moscow over Ukraine. Russia’s growth in 2015 recorded a minus 3.7 while this year a minus 1.9 is expected. Ukraine’s economy is equally projected to suffer this year.
The enthusiasm over what many economists call the BRICS (Brazil, Russia, India, China, South Africa) seems to have dampened as the once vaunted group has weathered notable economic setbacks which have knocked down many of the BRICS.
The report stresses that persistent weakness in demand in developed economies remains a drag on global growth. Equally the massive debt levels accumulated by government spending in the USA and much of Europe has served as an deadweight to hinder a robust economic recovery.
The U.S. must revive its economy through entrepreneurism, not more government spending.
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]