UN: 4.7% Global Growth in 2021 01/26 08:03
The United Nations warned Monday that the world economy is "on a
cliffhanger," still reeling from the COVID-19 pandemic whose impact will be
felt for years but still expected to make a modest recovery of 4.7% in 2021
which would barely offset 2020 losses.
UNITED NATIONS (AP) -- The United Nations warned Monday that the world
economy is "on a cliffhanger," still reeling from the COVID-19 pandemic whose
impact will be felt for years but still expected to make a modest recovery of
4.7% in 2021 which would barely offset 2020 losses.
The U.N.'s new report on the World Economic Situation and Prospects said the
once-in-a-century crisis sparked by the global impact of the coronavirus caused
the global economy to shrink by 4.3% in 2020 -- the sharpest contraction in
global output since the Great Depression that began in 1929 and far higher than
the 1.7% reduction during the Great Recession of 2009.
"The depth and severity of the unprecedented crisis foreshadows a slow and
painful recovery," said U.N. chief economist Elliott Harris, the assistant
secretary-general for economic development. "As we step into a long recovery
phase with the roll out of the vaccines against COVID-19, we need to start
boosting longer-term investments that chart the path toward a more resilient
recovery -- accompanied by a fiscal stance that avoids premature austerity."
According to the report, the lockdowns, quarantine measures and social
distancing introduced during the second quarter of 2020 "helped to save lives
but also disrupted the livelihoods of hundreds of millions of people worldwide."
By April, it said, "full or partial lockdown measures had affected almost
2.7 billion workers, representing about 81% of the world's workforce." And it
said another 131 million people were pushed into poverty, many of them women,
children and people from marginalized communities.
China, the world's second-largest economy where COVID-19 first emerged, was
the only country in the world to register positive economic growth in 2020 --
2.4% -- and the U.N. forecasts that it will grow by 7.2% in 2021.
Hamid Rashid, chief of the U.N.'s Global Economic Monitoring Branch and the
report's lead author, told a news conference launching the report that China
will account for about 30% of global growth in 2021. If that happens, he said,
it will help many countries in Africa, Latin America and the Caribbean that
supply resources and commodities to China.
According to the U.N. forecasts, the U.S. economy will grow 3.4% in 2021
after shrinking 3.9% in 2020, Japan's economy will grow 3% this year after
contracting 5.4% last year, and economies of Euro-zone countries will grow 5%
in 2021 after shrinking 7.4% in 2020.
Developing countries saw a less severe contraction of 2.5% last year, and
the U.N. is forecasting a 5.7% rebound in 2021.
The U.N. said "it will remain critical" that the Group of 20 -- the world's
20 major economies accounting for nearly 80% of world output -- "return to the
trajectory of growth, not only to lift the rest of the world economies but also
to make the world economy more resilient to future shocks."
The $12.7 trillion in global fiscal stimulus -- more than half from Germany,
Japan and the United States -- "prevented a Great Depression-like economic
catastrophe worldwide," the U.N. said. "In dollar terms, stimulus spending per
capital averaged nearly $10,000 in the developed countries, while it amounted
to less than $20 per capita in the least developed countries," the report said.
Rashid, the U.N. official, said the primary goal of the fiscal stimulus was
to stabilize the global economy "so there was no drying up of liquidity." This
was achieved, he said, but the secondary goal was to stimulate investments and
prevent bankruptcies and "here we see significant slack."
Rashid said all the major economies saw significant increases in money
supply, about 23% for the United States, which isn't surprising since most
stimulus money went into the financial markets because households were unable
to spend the money or businesses were unable to invest because they were
uncertain about the future.
The big winners were stock markets, he said.
Looking at the major stock indexes, Rashid said, Japan's Nikkei 225
increased about 45% between March and December and the Dow Jones and S&P 500
both went up by more than 30%, compared to average increases below 10% in the
previous five years.
"And that is alarming because that shows the disconnect between the real
economic activities and the financial sector activities," he said.