United Nations Conference on Trade and Development: Policy mistakes may trigger an economic recession that is more severe than the financial crisis in 2007
Picture: ILO/Marcel Crozet Production workshop of a garment export factory in Bangladesh. The new report released by the United Nations Conference on Trade and Development (UNDC) on Monday shows that if some developed economies do not quickly adjust their major fiscal and monetary policies, the world will fall into recession and prolonged economic stagnation. "It's time to start taking measures to avoid a recession," said Rebeca Grynspan, Secretary-General of UNCTAD. "It's a matter of policy choice and political will." She noted that the current action plan has hurt the interests of the most vulnerable countries.
UNCTAD warned that the policy-induced global economic recession may be more severe than the global financial crisis from 2007 to 2009.
UNCTAD said that excessive monetary tightening policies and lack of financial support may further plunge the economies of developing countries in into a series of crises.
This report, titled "The Development Prospects of a Fragile World", pointed out that the supply side impact, weakened consumer and investor confidence, and the outbreak of the Ukrainian war have all led to a global economic slowdown and triggered inflationary pressure.
Although all regions will be affected, the most affected are developing countries, many of which are at risk of debt defaults.
As climate pressure increases, some fragile economies lack fiscal space and are unable to cope with climate disasters, thus facing more serious losses and damages.
outlook is bleak
report predicts that world economic growth will slow to 2.5% in 2022 and drop to 2.2% in 2023. This global economic slowdown will make the global GDP lower than the development trend before the COVID-19 pandemic and cause more than $17 trillion in losses to global productivity.
UNDC predicts that China's economic activity will slow sharply to 3.9% in 2022.
Nevertheless, the major central bank is still raising interest rates significantly, which will hinder economic growth and further put the heavily-debted countries in trouble.
The global economic slowdown will further plunge developing countries into a series of debt, health and climate crises.
The report notes that middle-income countries in Latin America and low-income countries in Africa may experience the worst economic slowdown this year.
debt crisis
UNCTAD warns that a global debt crisis may break out in the future as 60% of low-income countries and 30% of emerging market economies are facing or about to face debt pressure.
Countries that faced debt pressure before the outbreak of the new crown epidemic were particularly hit by the global economic slowdown.
Climate shocks will put deep-debted developing countries in the face of more severe economic instability, but major G20 economies and other international financial institutions seem to be fully aware of this.
"It is estimated that developing countries have spent $379 billion in foreign exchange reserves this year to protect their currencies." This amount is nearly twice the amount of Special Drawing Rights recently allocated to these countries to supplement their official foreign exchange reserves.
UNCTAD requires international financial institutions to provide urgently more liquidity and extend debt relief to developing countries. UNCTAD calls on the Fund to allow countries to use SDRs more equitably; and to establish a multilateral legal framework for debt restructuring as a priority.
dramatically hikes
At the same time, the move by developed economies to raise interest rates the most vulnerable countries hit the most vulnerable countries the most.
This year, about 90 developing countries' local currencies depreciated against the US dollar, with more than one-third of the local currencies depreciating by more than 10%.
After the outbreak of the Ukrainian War, the prices of necessities such as food and energy soared, and the appreciation of the US dollar led to rising import prices in developing countries, making the situation even more serious.
Looking ahead, UNCTAD calls on developed economies to avoid austerity measures and calls on international organizations to reform their multilateral structures and treat developing countries more fairly.
stabilizes the market and curbs speculation
For most of the past two years, the prices of commodity prices, especially food and energy, have brought huge challenges to households around the world.
Although the rising fertilizer prices continue to have adverse effects on many small farmers around the world, the commodity market has been in a state of turmoil for nearly a decade.
report said that although the Black Sea Cereals Initiative facilitated by United Nations has greatly helped reduce global food prices, the current role of speculators and speculation in futures contracts, commodity exchange and trading open-end index fund is not paid enough attention to.
In addition, large multinational corporations with strong market strength seem to have taken advantage of the current situation to increase their profits at the expense of some of the poorest countries in the world.
UNDC requires governments to increase public spending and control the prices of energy, food and other important commodities; ask investors to increase investment in renewable energy; and calls on the international community to increase support for the Black Sea Cereals Initiative, which was facilitated by the United Nations.
