CAUTION: ADVANCE RELEASE
GENEVA, 11 July -- A deep slowdown in the world’s major economies is dragging growth prospects of developing and transition economies downward, and threatens to continue well into the second half of 2001, according to the United Nations latest survey of the world economy, to be released on 13 July.
There is cautious optimism that the slowdown will end late in 2001, chapter 1 of the UN World Economic and Social Survey 2001 says, but "the recovery [in the developed countries] may not be as rapid as the downturn", the United Nations warns, "partly because it is likely to take some time to adjust to the excess capacity that has been created by the high rate of investment in certain technology sectors".
Unlike the economic dislocations of 1997–1998, which originated in emerging economies and spread through financial markets, the current slowdown started in the United States and is being transmitted largely through trade, the Survey finds. International trade expansion is expected to decelerate from over 12 per cent in 2000 to some 5 ½ per cent in 2001, with only a slight improvement anticipated for 2002. Reduced demand for exports and softer prices for many commodities are undercutting the recovery of many developing countries and economies in transition from the crisis of 1997-1998, according to the Survey.
Latin America and East Asia will be most affected directly by the slowdown in developed countries’ imports, while many countries in Africa continue to be vulnerable to downturns in commodity prices. Oil-exporting countries, including members of the Commonwealth of Independent States, will lose some of the stimulus they received from the earlier surge in oil prices. At the same time, "the slowdown has been accompanied by worsening external financing conditions for developing and transition economies" and "external funds for these economies will remain limited in relation to their needs".
New features in the business cycle, which helped to fuel rapid expansion in the United States in 1999 and 2000, will also impinge on the exit from the current slowdown, United Nations economists say.
"The new economy’ has been fostered by the dynamics of corporate profit, the availability of credit, and investment spending, making these factors the key determinants of the new business cycle", according to the Survey. "Correspondingly, the factors behind the slowdown [in the United States] were the interrelated decline in corporate profits, the tightening of credit conditions, and the decrease in investment spending. ... This combination of factors, rather than an acceleration in core inflation, caused business confidence to decline and brought the investment boom to an end, precipitating a slowdown." Under these conditions, "reductions in interest rates and the consequential easing in credit conditions are unlikely to have any impact on investment in the technology sectors until perceptions about future profits have improved, although they may have some beneficial effects…".
Looking ahead, policy makers will have to address the risks posed by the large external imbalances among nations, notably the United States trade deficit. More generally, the report says, "there remains a need for further reform of the global trading system and the international financial architecture in order to facilitate development by securing less volatile and more balanced world economic growth in the long run".
For more information, contact Yvan Chemla at the United Nations Information Service in Geneva, telephone (44-21) 917-2300, e-mail YvanCHEMLA@HUBGVA; or Klomjit Chandrapanya at the United Nations Department of Public Information in New York, telephone 1-212-963-9495; e-mail firstname.lastname@example.org
World Economic and Social Survey 2001 (Sales No. E. 01.II.C.1, ISBN 92-1-109137-3) from United Nations Publications, Two UN Plaza, Room DC2-853, Dept. PRES, New York NY 10017 USA; Tel. 800-253-9646 or 212-963-8302; Fax. 212-963-3489; e-mail: email@example.com; or Palais des Nations, CH-1211 Geneva 10, Switzerland; Tel. 41-22-917-2614, Fax. 41-22-917-0027, e-mail: firstname.lastname@example.org; Internet: http://www.un.org/publications
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