Global economic growth drops to 2.6%
By Isaac Anumihe, Abuja
As the war between Ukraine and Russia continues, the United Nations Conference on Trade and Development (UNCTAD) has predicted a global economic slowdown from 3.6% previously forecast to 2.6% this year .
UNCTAD’s Director of Globalization and Development Strategies Division, Richard Kozul-Wright, says Russia’s invasion of Ukraine is the main contributing factor to the potentially devastating 1% drop in projected global economic growth This year.
“We forecast in September last year that the global economy would grow by around 3.6%. We expect it to grow by 2.6% this year and of course the main contributing factor is the war in Ukraine,” Kozul-Wright said.
He said that with inflation on the rise and developing countries already burdened with a $1 trillion debt burden to repay to creditors, the UN body denounced the inadequate financial measures already taken to help them withstand volatile exchange rates, rising interest rates and soaring food prices. and fuel prices.
“Massive multilateral fiscal reform – perhaps on the scale and ambition of the US Marshall Plan that bolstered Western Europe after World War II – is urgently needed to improve countries’ financial liquidity. developing countries to prevent them – and even middle-income countries – from sinking,” the UNCTAD director said, as he called on the International Monetary Fund (IMF) and the World Bank to help developing countries .
Confirming the Director’s position, UNCTAD Secretary-General Ms. Rebeca Grynspan said the outlook for the global economy was rapidly deteriorating and that this year, after two years of the COVID-19 crisis, the rate of average growth of the world economy will be 2.6%, compared to 5.5% last year and compared to projections made in the last quarter of 2021.
In particular, Grynspan called for emergency measures from the IMF and the World Bank, to activate rapid financing instruments that the IMF can provide to help countries facing imminent balance of payments problems.
“Conditions are getting worse for everyone,” the UNCTAD chief continued, noting how the climate crisis has played its part, as well as successive droughts in the Horn of Africa, the COVID-19 pandemic in course and the war in Ukraine.
Even relatively wealthy countries that are struggling with multiple cost-of-living pressures, she said, have already sought help from the international system to keep them afloat.
“Pakistan returned (to the IMF) at the end of last year. Sri Lanka has now approached the IMF to arrange a program. Egypt, which was already under the program, returned to the IMF to renegotiate. And these are countries – they are not least developed countries; they are middle-income countries that are under very strong economic and, in some cases, political pressures, due to the shocks they are currently facing,” Kozul-Wright noted.
UNCTAD further explained that the world’s poorest, import-dependent countries will be hardest hit by the global economic downturn.
“The burden is being borne by developing countries because of the very sharp rise in food, energy and fertilizer prices and also the financial stress that developing countries are already in,” said the world body, adding that although all regions of the world economy will be negatively affected by this crisis, major exporters of raw materials should benefit from a rise in prices.
“But the European Union will see quite a significant deterioration in its growth performance this year… so will parts of Central and South Asia,” the body said.
UNCTAD’s policy recommendations include the need for global financial reform to give developing countries the economic space for “reasonable growth” so they can service potentially crippling levels of debt.
Meanwhile, debt service in 2020 for developing countries excluding China was already $1 trillion.
“We know and have argued in the past that the initiatives of the G20, the Debt Service Suspension Initiative, are welcome. We welcomed him, but it was clearly insufficient. It provided something in the order of $11 billion for eligible countries,” observed UNCTAD.