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Sep 06, 2011, 09.17 PM IST
Projecting a slowdown in global economic growth in 2011 to to around 3%, compared to almost 4% last year, a UN agency today said developing economies could be affected by recession in developed nations.
"The pace of global economic recovery has been slowing down in 2011... This year, world Gross Domestic Product (GDP) is expected to grow by 3.1%, compared to 3.9% in 2010," the United Nations Conference on Trade and Development said in a report released today.
It said the developing economies have sustained their strong growth path, despite the recent global downturn, mainly due to domestic demand.
"However, they must face financial instability and speculative capital flows generated in developed economies and would not be spared by a new recession in the North," UNCTAD's Trade and Development Report 2011 (TDR 2011) said.
Projecting a slowdown in global economic growth in 2011, UNCTAD said private demand alone is not sufficient to maintain momentum of recovery due to high unemployment and stagnant wages in many countries.
While developing economies are expected to regain the pre-crisis growth rate of 6% this year, growth in developed economies is expected to be between only 1.5-2%, it said.
Regarding South Asia, of which India is a part, UNCTAD said the region is likely to be among the best performers with a growth of 7% in 2011.
"Although growth in developing countries has become more and more dependent on the expansion of domestic markets, these countries face significant external risks because of economic weakness in the developed economies and a lack of significant reforms in international financial markets," UNCTAD said.
It said that emerging economies remain vulnerable to trade and financial shocks that could strongly affect volume of their exports and the prices of primary commodities, as happened in 2008.
The report said that growth in US is likely to remain low on account of low domestic demand, stagnating wages and employment and low interest rates. The debt crisis, along with spreading fiscal austerity, is also expected to act as a drag on the global growth.
According to the TDR 2011, trade remains an area of concern, especially for the richer nations.
"In 2011, the volume of international trade is expected to return to single-digit from 14% in 2010, particularly in developed economies. Recovery of trade has
Regarding international commodity prices, which have seen a decline since the second quarter of 2011, UNCTAD said the fall is on account of negative sentiments of financial investors.
It also said that monetary measures to reduce demands have failed to achieve the target of reducing inflation.
"The implementation of measures to reduce domestic demand in response to high commodity prices has proven to be inappropriate, harming growth without significantly lowering inflation," UNCTAD said.
According to it, wages should go up in line with productivity and said such a recourse to "incomes policy" is a more rational way to control inflationary pressures and to support domestic demand growth.
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