UN economic forecast cites conflicts, sluggish trade, high interest and climate disasters

UNITED NATIONS –

The United Nations issued a sombre international financial forecast for 2024 on Thursday, pointing to challenges from escalating conflicts, sluggish international commerce, persistently excessive rates of interest and rising local weather disasters.

In its flagship financial report, the UN projected that international financial progress would sluggish to 2.4% this 12 months from an estimated 2.7% in 2023, which exceeds expectations. But each are nonetheless beneath the three% progress fee earlier than the COVID-19 pandemic started in 2020, it mentioned.

The UN forecast is decrease than these of the International Monetary Fund in October and the Organization for Economic Cooperation and Development in late November.

The IMF mentioned it expects international progress to sluggish from an anticipated 3% in 2023 to 2.9% in 2024. The Paris-based OECD, comprising 38 primarily developed international locations, estimated that worldwide progress would additionally sluggish from an anticipated 2.9% in 2023 to 2.7% in 2024.

The UN’s report — World Economic Situation and Prospects 2024 — warned that the prospects of extended tighter credit score circumstances and better borrowing prices current “strong headwinds” for a world financial system saddled with debt, particularly in poorer growing international locations, and needing funding to resuscitate progress.

Shantanu Mukherjee, director of the UN’s Economic Analysis and Policy Division, mentioned fears of a recession in 2023 had been averted primarily as a result of United States, the world’s largest financial system, curbing excessive inflation with out placing the brakes on the financial system.

But he instructed a news convention launching the report: “We’re still not out of the danger zone.”

Mukherjee mentioned that is as a result of the unsettled state of affairs on the planet might gas inflation. For instance, one other provide chain shock or downside in gas availability or distribution might immediate one other rate of interest hike to deliver the state of affairs underneath management, he mentioned.

“We’re not expecting a recession, per se, but because there is volatility in the environment around us, this is the major source of risk,” he mentioned.

Very high-interest charges for a very long time and the specter of attainable shocks to costs contribute to “quite a difficult balancing act,” Mukherjee mentioned. “So that’s really why we said that we are not yet out of the woods.”

According to the report, international inflation, which was at 8.1% in 2022, is estimated to have declined to five.7% in 2023, and is projected to say no additional to three.9% in 2023 .

But in a couple of quarter of all growing international locations, annual inflation is projected to exceed 10% this 12 months, it mentioned.

While the U.S. financial system carried out “remarkably well” in 2023, the report mentioned progress is anticipated to say no from an estimated 2.5% in 2023 to 1.4% this 12 months.

“Amid falling household savings, high-interest rates, and a gradually softening labour market, consumer spending is expected to weaken in 2024 and investment is projected to remain sluggish,” the UN mentioned. “While the likelihood of a hard landing has declined considerably, the United States economy will face significant downside risks from deteriorating labour, housing and financial markets.”

With elevated inflation and high-interest charges, the report mentioned Europe faces “a challenging economic outlook.”

GDP within the European Union is forecast to increase from 0.5% in 2023 to 1.2% in 2024, it mentioned, with the rise pushed by “a pick-up in consumer spending as price pressures ease, real wages rise, and labour markets remain robust.”

Japan, the world’s fourth-largest financial system, is projected to see financial progress sluggish from 1.7% in 2023 to 1.2% this 12 months regardless of the nation’s financial and financial insurance policies, the report mentioned, “Rising inflation may signal an end from the deflationary trend that persisted for more than two decades” within the nation, it mentioned.

In China, the world’s second-largest financial system, the UN mentioned restoration from COVID lockdowns has been extra gradual than anticipated “amid home and worldwide headwinds.

With financial progress of simply 3.0% in 2022, the report mentioned China turned a nook throughout the second half of 2023 with the expansion fee reaching 5.3%. But it mentioned the mix of a weak property sector and faltering exterior demand for its merchandise “will nudge progress down reasonably to 4.7% in 2024.

In growing areas, the UN mentioned financial progress in Africa is projected to stay weak with a slight improve from a mean of three.3% in 2023 to three.5% in 2024.

“The unfolding climate crisis and extreme weather events will undermine agricultural output and tourism, while geopolitical instability will continue to adversely impact several subregions especially the Sahel and North Africa,” the report mentioned.

The UN forecasts a average slowdown in East Asia economies from 4.9% in 2023 to 4.6% in 2024. In Western Asia, GDP is forecast to develop by 2.9% in 2024, up from 1.7% in 2023.

In South Asia, GDP rose by an estimated 5.3% final 12 months and is projected to extend by 5.2% in 2024, “driven by a robust expansion in India, which remains the fastest growing large economy in the world.” Its progress is forecast to achieve 6.2% this 12 months, just like its projected 6.3% improve in 2023.