A new UN report on Monday says countries must adopt new economic policies to adjust to structural changes in the world economy sparked by the onset of the global financial crisis five years ago.
The report, entitled: “Trade and Development Report 2013”, which was launched at the UN headquarters in New York, noted that developed countries had so far addressed the crisis by implementing stimulus measures that relied on expansionary monetary policies.
It, however, said these had been unsuccessful in fostering growth, as they had been combined with fiscal austerity and subdued private demands.
Instead, the report, which was produced by the UN Conference on Trade and Development (UNCTAD), argued that governments must address the fundamental causes of the crisis, in particular rising income inequality, the diminishing role of the States and the predominant role of the poorly regulated financial sector.
In contrast, it stated that developing countries had been able to mitigate the adverse impact of the crisis in the developed world by implementing counter cyclical policies, which stimulated the economy when it was facing a downturn.
However, the effects of these policies, it said were fading away and the economic environment showed few signs of improving, making it increasingly difficult to avoid slowdowns.
The report also contended that developing and transition economies that heavily depended on exports must reconsider their development strategies and rely more on domestic and regional demand.
Mr. Alfredo Calcagno, Head, Macroeconomic and Development Branch, Division on Globalization and Development Strategies, at UN Conference on Trade and Development (UNCTAD) said: “We are trying to understand this crisis in the long-run, and if it is a structural crisis, as we have seen, then this would mean a lot in terms of shifting economic policies.”
He said that one of the main changes in their view was that developing countries must concentrate on fostering their domestic trade in order to continue to grow.
“This does not mean that exports are no longer important, but they need to strengthen their domestic markets to adapt to new demand conditions,” he said.
Mr. Calcagno also noted that developed countries were not addressing the root causes of the financial crisis, and this, compounded with mishandling the crisis itself, had contributed to the current disarray of the global economy.
Meanwhile, report further said, since 2008, the world output growth had slowed down and did not show signs of recovering.
It fell from 4.1 per cent in 2010 to 2.8 per cent in 2011 and then to 2.2 per cent in 2012, it said, adding that it would further decelerate to 2.1 per cent this year.