The United Nations Conference on Trade and Development (UNCTAD) has reported that the world economy is expected to slow from 3% growth in 2019 to 2.4% by 2023, with few indications of an upturn in 2024.
Rebecca Grynspan, UNCTAD Secretary-General, stresses the need for a balanced approach to policy-making, including fiscal, monetary and supply-side measures, to promote productive investment and generate better jobs. She also highlights the necessity of regulating international trading and financial systems to reduce inequality.
The UNCTAD report indicates that the global economic recovery is characterized by a great deal of disparity, raising questions about the best way forward in the absence of policy coordination. In the United States, despite increasing interest rates, the economy has held its own, due to consumer expenditure, the lack of fiscal austerity measures, and proactive monetary intervention.
Meanwhile, Europe is at risk of a recession, with monetary policy tightening and a host of economic headwinds. Economic growth is being hampered by falling real wages and fiscal austerity.
China, while showing some signs of recuperation, is struggling with weak domestic consumer demand and private investment. However, it has more fiscal policy options than other major economies, which could be used to tackle these issues.
One of the main issues is the increasing economic inequality, particularly in developing countries that have been affected by the monetary tightening in wealthier nations. This widening of the wealth gap could thwart the fragile economic recovery and impede the achievement of the Sustainable Development Goals (SDGs).
Moreover, many developing countries are facing a debt crisis, as rising interest rates, depreciating currencies and sluggish export growth contribute to a heavy debt service burden.