05/16/2008, 00.00
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UN concerned about world economic downturn and high inflation

In its mid-year economic report, the UN forecasts low or zero growth for developed countries. Developing countries will continue to grow but inflation will likely be a problem. If the US does not overcome its present situation very soon, other countries, including those of East Asia, will have to pull the world economy along.

New York (AsiaNews/Agencies) – The world economy is set to grow just 1.8 per cent this year compared to a global inflation rate of 3.7 per cent, this according to the United Nations pessimistic mid-year economic projections which were released yesterday.

This year’s projected growth is down from last year’s which stood at 3.8 per cent and the downturn was expected to continue next year with only slightly higher economic growth of 2.1 per cent, the UN report said.

The drop will be especially felt in developed countries, with the United States leading the decline at negative growth rate of - 0.2 per cent this year, with only a slight recovery next year at a 0.2 per cent rise.

Western Europe's growth rate is also set to drop from 2.6 per cent last year to 1.1 per cent this year, whilst Japan's economic growth is supposed to decline from 2.1 per cent last year to 0.9 per cent this year.

By contrast, developing countries will not suffer as much. They should grow 5 per cent this year and 4.8 per cent next year compared with a robust 7.3 per cent last year.

The great economic question mark for them will be inflation which is expected to accelerate this year to 3.7 per cent, this following a sharp rise in commodity prices. But for many analysts Asia’s rate is likely to be even greater.

For the UN report the crisis is the outcome of structural problems in the economies of the more developed countries (starting with the debacle of the US subprime market and the implosion of the real estate market), the ongoing depreciation of the US dollar, and the rising price of oil and primary commodities. Making matters worse recession does not seem to have yet run its course in the United States (unemployment still growing, real estate spending down and higher distrust in the market).

The net effect has been a slower growth in world trade from 7.2 per cent last year to 4.7 per cent in early this year, largely due to weak US demand for imported goods.

This means, according to the report, that a number of developed countries in Europe as well as Canada and Japan, not to mention “the emerging-market economies in East Asia and the main oil exporters [will] have a decisive role in engineering a more balanced and sustainable path of economic growth.”

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