The world’s recovery from the 2008 financial crisis is losing steam, with growth, hit by austerity drives in rich countries, not enough to restore the 30 million lost jobs in the next two years, the UN said on Wednesday.
“The road to recovery from the Great Recession is proving to be long, winding and rocky,” said an annual UN survey, World Economic Situation and Prospects 2011. “After a year of fragile and uneven recovery, growth of the world economy is now decelerating on a broad front, presaging weaker global growth in the outlook.”
The report forecast that, after a better-than-expected rate of 3.6 percent this year, the world economy’s growth would slow to just 3.1 percent next year — slightly less than a mid-year UN review predicted in May — and 3.5 percent in 2012.
The projections were broadly in line with those issued in the past two months by the IMF and the Organisation for Economic Co--operation and Development, which both forecast a 4.2 percent rise next year.
The UN report said US economic growth was expected to be 2.3 percent next year — a drop of 0.3 percent on its May forecast — after 2.6 percent this year. Growth would be still weaker in the eurozone at 1.3 percent, and Japan at 1.1 percent.
The recovery will continue to be driven by developing countries — led by China, India and Brazil — which had contributed to more than half of global expansion since late last year, the UN report said. However, even their growth was expected to slow to around 6 percent over the next two years.
“The core message is that no, we’re not out of the woods yet and still major risks are looming,” the report’s lead author, Rob Vos, told reporters.
Tax hikes and spending cuts were also worsening unemployment, the report said. Saying at least 30 million jobs had been lost worldwide because of the financial crisis, it predicted that it would take some five years to restore them.
Weaknesses in developed -economies, including sluggish growth in the US and debt crises on the periphery of Europe, were dragging down the global recovery and posing risks for world economic stability, it said.
“There will be no quick fix for the problems these economies are still facing in the aftermath of the [2008] financial crisis,” it said.
The report also queried the policy of “quantitative easing” — or pumping money into the economy by buying government debt. The US Federal Reserve announced a program on Nov. 3 to buy US$600 billion in government bonds by the middle of next year.
“Further quantitative easing and a further depreciation of the [US] dollar could be a way for the United States to try to inflate and export its way out of its large foreign liability position,” the report said. “But it could more likely risk disruption of trade and financial markets.”
In other developments, Japan’s fragile economy was given a boost yesterday with data showing business investment between July and September rose for the first time in more than three years.
The 5 percent year-on-year second quarter jump in corporate capital spending was mainly led by automakers investing in developing and producing environmentally friendly cars, a Japanese Finance Ministry official said.
Japanese firms have seen a solid recovery in earnings on overseas demand despite the recent strength of the yen, which makes exporters’ goods less competitive and erodes repatriated overseas profits. Investment in plant and equipment by all industries excluding the financial and insurance sectors expanded to ￥9.56 trillion (US$114 billion), the first growth in 14 quarters, the Finance Ministry said.
The quarterly survey also showed that corporate pre-tax profits during the period increased 54.1 percent year on-year to ￥10.75 trillion, the fourth straight quarter of expansion.
Corporate sales also gained 6.5 percent to ￥337.28 trillion, the third consecutive quarterly increase, according to the data.
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