World economic growth falls below last forecast: UN

15 Dec '15

4 min read

With persistent output gaps, modest wage growth and lower commodity prices, global inflation is at its lowest level since 2009. Deflation risks in developed economies have diminished, but not disappeared, particularly in Japan and the euro area.

Growth in developed economies will gain some momentum in 2016, surpassing the 2 per cent mark for the first time since 2010, the report notes. Economic growth in developing and transition economies is expected to bottom out and gradually recover, but the external environment will continue to be challenging and growth will remain well below its potential.

Monetary authorities need to make concerted efforts to reduce uncertainty and financial volatility, striking a delicate balance between economic growth and financial stability objectives, the report said.

Given the massive build-up of private debt in many emerging economies, policymakers need to fine-tune their policy mix – more active fiscal policies, macro-prudential instruments, targeted labour market policies, among others – amid volatile global financial conditions.

The report highlights that monetary policies did most of the heavy-lifting since the global crisis to support growth but the time has come for fiscal policies to play a greater role. Well-designed and targeted labour market strategies are needed to complement fiscal policies to re-invigorate productivity, employment generation and output growth.

In a positive note on recent trends in environmental sustainability, it noted that global energy-related carbon emissions showed no growth in 2014 for the first time in 20 years, with the exception of 2009 when the global economy contracted. This suggests the possibility that the world might start to see some de-linking between economic growth and carbon emission growth. (SH)

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