People in a number of countries, mostly in Latin America and sub-Saharan Africa, will see their incomes stagnate or decline this year, the United Nations said on Thursday.
A decade after the financial crisis, the global economy remains sluggish, and trade and geopolitical tensions could further derail recovery, the U.N. said.
The world economy expanded by just 2.3% last year, its slowest pace in a decade, and could grow by 2.5% in 2020 if downside risks are kept at bay, it said in a report.
“For this year there is a hope of a pick-up, but downside risks and vulnerabilities remain very significant,” said Richard Kozul-Wright, head of globalisation and development strategies at the U.N. Conference on Trade and Development (UNCTAD) and co-author of the report. “A lot of the pick-up that we see for this year hinges on the performance of large emerging economies,” Kozul-Wright told a news briefing, naming Argentina, Mexico, Turkey and Russia.
The United Nations expects growth to remain “anaemic” in most advanced economies, including the United States. Japan may do better, because of the Olympics, Kozul-Wright said.
“Quite a large number of countries will actually see stagnation or decline in per capita incomes this year, predominantly in Latin America and Sub-Saharan Africa,” he said, flagging the burden of debt repayment and interest payments.
The World Bank last week trimmed its global growth forecast for 2019 and 2020 because of a slower-than-expected recovery in trade and investment. It also forecast 2020 growth at 2.5%. The United States and China signed Phase 1 of a trade agreement on Wednesday, defusing an 18-month row that has hit global growth.
“The direct impact of tariffs on the slowdown is probably not that great … but the knock-on effects of the breakdown of supply chains and other parts of that story on investment seem to be more significant,” Kozul-Wright said.
The World Bank’s concern over “policy uncertainty” appeared to be a euphemism for US President Donald Trump’s trade policies, he said. “Because the only explanation of policy uncertainty that they have is tariff tantrums and problems in the trading system,” he said. “The problems of the trading system pre-date Trump. And to try to blame everything for the kind of the weakening of global economy on policy positions of Trump we don’t find to be very convincing.
“We think there are very serious systemic problems that have not been dealt with properly that were to some extent the cause of the crisis and have continued in the decade since,” he said.
These included over-reliance on monetary policy, “historic highs” in debt levels, and stagnant investment.