SUMMARY
After attaining the highest growth rate in 2000 for more than a decade, the world economy experienced a sharp downturn over the last quarter of 2000 and into the new year. The principal factors behind this reversal and near-term economic prospects were examined in Trade and Development Report, 2001, issued in April, on the basis of preliminary data available for the first quarter of 2001. Based on an analysis of underlying imbalances and fragilities in the world economy, the UNCTAD secretariat argued that without a coordinated global policy response, the slowdown in the United States would produce a synchronous cyclical downturn in the world economy. Rather than a rapid rebound, the United States economy could experience a prolonged period of sluggish growth which even quick conventional policy actions might be unable to remedy. The Report also suggested that even Europe could be much more vulnerable to the slowdown in the United States than was generally expected by policy makers in the region, and without a determined change in economic policy, European growth would fall substantially below the 3 per cent experienced in the previous year. Similarly, without more aggressive measures designed to reverse persistent deflation, Japan's recovery remained highly fragile. If all these 'risks became reality, there would be a sharp deterioration in the external trading environment of developing countries, many of which were struggling to re-establish conditions for rapid and sustained growth after recent bouts of financial crisis. While some emerging markets were expecting to improve their performance as a result of lower United States interest rates and a weaker dollar, these benefits could be easily wiped out by reassessment of risks, rising risk spreads and falling capital inflows brought about by slowdown in global growth and a further round of uncertainty. [English only]
