UNCTAD: Promoting structural reforms to achieve sustainable growth

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UNCTAD: Promoting structural reforms to achieve sustainable growth

(People's Daily Online) 10:18, September 24, 2013

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Although five years have passed since the outbreak of the global financial crisis, the world economy is still in a state of disorder and global trade growth has actually stalled, according to the 2013 World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD) on Sept. 12.

The report shows that the developed economies are struggling to return to sustained recovery, which indicates that this crisis in essence is different from the previous periodic crisis.

The UNCTAD recommended that countries should actively promote structural reforms in order to boost the recovery of robust and sustainable growth of world economy.

The report forecasts that in 2013, the world economy will maintain slow growth of 2.1 percent, almost the same with that of 2012.

The prediction is based on the inefficiency of ultra-loose monetary policy implemented by the major developed economies in creation of credit and stimulus of consumption; and fiscal austerity and wage policy made their short and medium-term economic outlook deteriorate further. Some developing economies and transition economies have been carrying out macroeconomic stimulus policies to offset the impacts of the financial crisis.

However, due to the effects of these policies are gradually disappearing, and there is no signs for improvement in the external economic environment, developing economies and transition economies are facing increasing challenges to maintain the momentum of economic growth.

The UNCTAD believes that the developed economies will mange just 1 percent growth in 2013.

Specifically, the E.U. economy is expected to fall into recession for the second consecutive year, with the GDP shrinking by 0.2 percent; and the economy in eurozone countries will get worse than that of other E.U. countries.

The U.S. economy is forecast to grow by 1.7 percent, thanks to the improved performance of banking sector and the gradual recovery of private consumption. But the decreasing public spending including investment in infrastructure will not be beneficial to the growth.

Due to the ultra-loose monetary policy and expansionary fiscal policy, the Japanese economy shows signs of stepping out of the austerity and is expected to increase by 1.9 percent.

Economic growth in the developing economies and transition economies are expected to reach 5 percent and 3 percent in 2013 respectively.

As developing economies grow faster than developed economies, their proportion in the global economy increased significantly: contribution to the international production increased to 36 percent in 2012 from 22 percent in 2000, and their export turnover also climbed to 45 percent from 32 percent.

In the current context of weak demand in developed countries, growth of many developing economies is mainly driven by domestic consumption rather than exports. Especially in China, the contribution of net exports to economy continued to decline, while investment in fixed assets and private consumption continued to boot economic growth. China’s economic growth in 2013 is expected to be 7.6 percent.

According to the annual report, the international trade in goods and services had not yet recovered to pre-crisis level and recession in developed economies is the main reason for the slow growth of international trade.

After sharp fall in 2008 and 2009, and rapid recovery in 2010, international trade in 2011 saw only 5.3 percent growth and witnessed 1.7 percent growth in 2012. The prospects of international trade remain uncertain in 2013 and there are not any obvious signs of growth yet. The export-oriented economic policy in some economies is difficult to contribute to the growth.

The UNCTAD, as the UN's trade and development agency, suggested that to promote the strong and sustainable world economic growth, on the one hand, stimulus policies should be formulated based on the stimulation of domestic consumption, and regaining of confidence in household and businesses; on the other hand, structure reforms are imperative, which should get involved in the areas including financial sector, labor market, public finance, and central bank system.

Read the Chinese version: 推动结构性改革实现可持续增长