The United Nations lowered its global economic growth forecast by 0.3 percentage points due to deterioration in the prospects of the economies in transition and several large developing countries, especially in South America, a report released by the UN showed Tuesday.
The report, titled ‘World Economic Situation and Prospects Mid-2015 Update,’ was published by the UN Department of Economic and Social Affairs (DESA) on Tuesday. It said the world economy continues to grow at a modest pace with a gradual improvement expected for the second half of 2015 and 2016.
The growth of world gross domestic product is expected to improve slightly to 2.8 percent in 2015 from 2.6 percent in 2014, a downward revision by 0.3 percentage points from the forecast presented in the World Economic Situation and Prospects 2015 (WESP) in January.
The global growth is expected to improve to 3.1 percent in 2016, which is still well below the pre-crisis pace, the report stated. Previously, the global economy was projected to grow by 3.3 percent in 2016.
Almost all major developed economies are projected to see the growth momentum picking up, with average growth expected to accelerate from 1.6 percent in 2014 to 2.2 percent in 2015, reflecting a moderately improved outlook for the euro area.
Despite expectations of a pick-up in growth, developed economies still face considerable headwinds from the legacies of the global financial crisis, including subdued employment levels, elevated private and public sector debt, and financial sector fragilities.
The average growth in developing countries is predicted to remain at 4.4 percent, about 3 percentage points below the pre-crisis pace.
The report noted that the growth divergence between various regions is widening in 2015, owing to differing impacts from the recent decline in the prices of oil and other commodities, as well as country-specific factors.
Meanwhile, the transition economies are expected to see their GDP decline by 2 percent. Specifically, the U.N. expects the Russian economy to shrink in 2015, as high interest rates, low oil prices and weak business sentiment impacting domestic demand. The global body also sees the weakness impacting other countries in the region.
The report warned that the major downside risks are related to the impact of the upcoming monetary policy normalization in the U.S., ongoing uncertainties in the euro area, potential spillovers from geopolitical conflicts, and persistent vulnerabilities in emerging economies.
A broad set of policy measures at the domestic, regional and global level is needed in order to mitigate these risks and ensure a return to strong, sustainable and balanced growth, the report noted. It identifies key challenges in the areas of monetary, fiscal, labor market and trade policies, underlining the need for strengthened international policy coordination.
Such coordination becomes ever more critical as the Member States of the United Nations are expected to adopt a new financing framework for sustainable development and an ambitious post-2015 sustainable development agenda, the report stated.
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