The global economy is stalling, with growth slowing in most regions compared with last year and only a few countries bucking the trend, cautions the Trade and Development Report 2023 released recently by the United Nations Conference on Trade and Development (UNCTAD).

Divergent growth paths, widening inequalities, growing market concentration and mounting debt burdens cast shadows on the future, it notes.

The global economy is stalling, with growth slowing in most regions compared with last year and only a few countries bucking the trend, cautions UNCTAD.
Divergent growth paths, widening inequalities, growing market concentration and mounting debt burdens cast shadows on the future.
UNCTAD has called for global financial reforms and more pragmatic policies.

The prospect of meeting the UN Sustainable Development Goals (SDGs) by 2030 is also fading as a combination of rising interest rates, weakening currencies and slowing export growth squeezes the fiscal space needed for governments to fight climate change and provide for their people.

The report calls for a change in policy direction–including by leading central banks–and accompanying institutional reforms promised during the COVID-19 crisis to avert a lost decade.

It recommends global financial reforms, more pragmatic policies to tackle inflation, inequality and sovereign debt distress, and stronger oversight of key markets.

“We need a balanced policy mix of fiscal, monetary and supply-side measures to achieve financial sustainability, boost productive investment and create better jobs. Regulation needs to address the deepening asymmetries of the international trading and financial system,” UNCTAD secretary general Rebeca Grynspan said.

Globally, the post-pandemic recovery is divergent. While some economies, including Brazil, China, India, Japan, Mexico, Russia and the United States have demonstrated resilience in 2023, others face more formidable challenges.

In the context of slower growth and absent policy coordination, this divergence raises concerns about the way forward for the global economy.

Despite rising interest rates, the United States economy has confounded more negative predictions, experiencing a measured economic slowdown so far, as inflationary pressures ease, thanks to robust consumer spending, eschewing fiscal austerity and active monetary intervention to stem financial contagion at the start of the year.

However, the report warns of lingering investment concerns in the United States, especially in light of prolonged high interest rates.

Europe is on the edge of recession, grappling with a rapid tightening of monetary policy and strong economic headwinds, with major economies slowing down and Germany already contracting. Stagnant or falling real wages across the continent, compounded by fiscal austerity, are dragging down growth, the report notes.

China, though showing signs of recovery from last year, faces weak domestic consumer demand and private investment. The Asian giant, however, has more fiscal policy space than other large economies to address these challenges.

Economic inequality remains a significant challenge, with developing countries disproportionately affected, including by the effects of monetary tightening in the advanced economies.

Debt burdens, the silent weight on many developing countries, remain a major concern. Rising interest rates, weakening currencies and sluggish export growth have combined to squeeze the fiscal space for essential needs, transforming the growing debt service burden into an unfolding development crisis.

Low or lower middle-income “frontier economies” have been hit hardest.

The report, therefore, proposes actions to get the global economy moving in the right direction by using a balanced policy mix of fiscal, monetary and supply-side measures to achieve financial stability, boost productive investment and create better jobs.

Coordination between national and supranational authorities is needed to manage inflationary pressures and ensure price stability, foster an environment conducive to investment-led growth, implement measures to reduce income disparities, improve real wages and reinforce social protection systems, it adds.

Fibre2Fashion News Desk (DS)