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UN: ‘World economy to strengthen over the next two years’

The UN World Economic Situation and Prospects 2014 mid-year update launched on Wednesday in New York, says the global economy is expected to strengthen over the next two years, despite a downgrade of growth prospects for some developing countries and transition economies, and “stubbornly slow” job growth.

Mr. Pingfan Hong, Chief of the Global Economic Monitoring Unit for the UN Department of Economic and Social Affairs (UNDESA), who presented the update at a briefing to UN reporters, noted that more than five years after the financial crisis, the world had continued to struggle with getting the global economic engine back to running at full capacity.

He said: “Compared to pre-crisis trends, we have not sufficiently boosted output, trade and employment to their potential levels.”

He noted that global growth had been revised from the forecasts presented in the 2014 report.

Growth of world gross product (WGP) is now projected at 2.8 per cent in 2014 and 3.2 per cent in 2015, up from 2.2 per cent in 2013.

The UN official, however, said this pace of expansion was still low compared to the growth path before the 2008 global financial crisis.

Mr. Hong said the report warned that risks and uncertainties for the world economy included international spill-overs from ongoing adjustment in monetary policies by developed economies, vulnerabilities of emerging economies and remaining fragilities in the euro area.

Others, he said, were long-term unsustainable public finance for many developed countries and geopolitical tensions.

He said the report noted that economies of developed countries were likely to grow at 2 per cent this year and 2.4 per cent in 2015 faster than in the two previous years, but still relatively weak.

Growth in North America, Japan and Western Europe will be impacted by trade imbalances, high unemployment, and ageing populations.

The Commonwealth of Independent States (CIS) region will also face a challenging international environment and, in addition, many countries are confronted with domestic challenges and risks and several large CIS economies stagnated in early 2014.

Mr. Hong said that globally, employment grew by 1.4 per cent in 2013, a similar pace as in 2012, but stubbornly slower than the rate of 1.7 per cent in pre-crisis years.

However, the global jobs gap, comparing the number of jobs today with the number that would exist using pre-crisis trends widened farther to 62 million in 2013.

As for developing economics, Africa will continue to see solid growth of 4.2 per cent this year, although political problems in a number of countries have led to a downward revision compared to the previous forecast.

“In Libya, for example, disruptions to oil output and exports will be a major drag on growth, underpinning a significantly lower growth rate for North Africa than previously forecast,” the official stressed.

Long-term unemployment has been rising in developed countries, which could lead to higher levels of structural unemployment. Across developing countries, a main challenge remains the level of informal employment, which, on average, reaches between 40 and 50 per cent in Africa, Asia and Latin America and the Caribbean.

“In the outlook, global employment is expected to continue growing at a slow pace,” he stated.

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