7th February – Risks to global growth
The newly released World Economic Situation and Prospects for 2019 illustrates how rising economic, social and environmental challenges hamper progress towards the United Nations Sustainable Development Goals.
- On the surface, the world economy remains on a steady trajectory.
- Many developed economies are operating close to their full potential with unemployment rates at historical lows.
- But headlines do not tell the whole story. There are many risk factors that could inflict significant damage on longer-term development prospects.
- There are many risk factors that could inflict significant damage on longer-term development prospects.
Challenges to global economy –
- Monetary policy challenges –
- Over the past year, trade policy disputes have escalated, and financial vulnerabilities have increased as global liquidity tightens.
- Global private and public debt is at a record high, well above the level seen in the run-up to the global financial crisis.
- Interest rates remain very low in most developed economies, while central bank balance sheets are still bloated. With limited monetary and fiscal space, the multilateral approaches, concerted actions — like those implemented in response to the 2008-09 crisis — may be difficult to arrange.
2. Inequality –
- Even if global growth remains robust, its benefits do not reach the places they are needed most.
- Incomes will stagnate or grow only marginally this year in parts of Africa, Western Asia, Latin America and the Caribbean.
- The challenges are most acute in Africa, where per capita growth has averaged only 0.3% over the past five years.
- Given rapid population growth, the fight against poverty will require faster economic growth and dramatic reductions in income inequality.
3. Climate Change –
- The transition towards environmental sustainability is not happening fast enough.
- The nature of growth is not compatible with holding the increase in the global average temperature to well below 2°C above pre-industrial levels.
- The frequency and intensity of extreme weather events are increasing, damaging vital infrastructure and causing large-scale displacement.
- The human and economic costs of such disasters fall overwhelmingly on low-income countries.
What should be done?
- Many of the challenges are global in nature and require collective and cooperative policy action.
- Withdrawal into nationalism and unilateral action will only pose further setbacks for the global community, especially for those already in danger of being left behind.
- Instead, policymakers need to work together to address the weaknesses of the current system and strengthen the multilateral framework.
Source – The Hindu
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