Wiseman Khuzwayo
Global economic growth should increase over the next two years, with continuing signs of improvement, according to a UN report released yesterday.
The body’s World Economic Situation and Prospects 2014 report says the global economy is expected to grow 3 percent this year and 3.3 percent next year, compared with an estimated growth of 2.1 percent for last year.
The report says Africa’s growth prospects remain relatively robust and should continue to improve. South Africa’s rates of growth of real gross domestic product (GDP) are projected at 3.3 percent this year and 3.7 percent next year.
The report is produced at the beginning of each year by the UN’s department of economic and social affairs, the UN Conference on Trade and Development and the five UN regional commissions.
It says the world economy experienced subdued growth for a second year last year, but some improvements in the fourth quarter led to the UN’s more positive forecast.
“The euro zone has finally ended a protracted recession. Growth in the US strengthened somewhat. A few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. These factors point to increasing global growth.”
It says in the US, fiscal tightening and a series of political gridlocks over budgetary issues weighed heavily on growth. However, quantitative monetary easing boosted equity prices.
The report says the inflation outlook remains tame globally, partly reflecting the excess capacity, high unemployment, fiscal austerity and a continued financial deleveraging in major developed economies.
It says: “The global employment situation remains dire, as long-lasting effects from the financial crisis continue to weigh on labour markets in many countries and regions.
“Among the developed economies, the most challenging situation is found in the euro area, in which the unemployment rates have reached as high as 27 percent in Greece and Spain, with youth unemployment rates surging to more than 50 percent.”
The report says Africa’s growth prospects remain relatively strong, with GDP growth projected to accelerate from 4 percent last year to 4.7 percent this year.
It says growth prospects in southern Africa are improving, largely because of projected increases in South Africa’s growth rate from 2.7 percent last year to 3.3 percent this year, declining labour market unrest, increased investments, and rising mineral output.
The report says during the global crisis, when emerging economies began defending their currencies from depreciation, foreign reserves were rapidly depleted, forcing these nations to seek aid from international financial institutions.
It says: “Currently, foreign reserves in most emerging economies are substantially higher. For example, even in the five economies that are under financial pressure, each of them has accumulated foreign reserves above 10 percent of GDP, not to mention a group of other emerging economies with much higher foreign reserves.”