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DEVELOPMENT: Asia to Lead Global Economic Recovery, Says U.N.

Thalif Deen

UNITED NATIONS, Jan 29 2010 (IPS) - The United Nations is predicting that the world’s developing nations will recover faster than industrial countries – even as they both try to struggle out of the post-2007 global financial crisis.

The meltdown has been characterised by several economic setbacks, including bank failures, a credit crunch, widespread unemployment, a sharp decline in exports and the collapse of the housing market.

Asked about the predicted recovery, Rob Vos, director of the U.N.’s development policy and analysis division, told IPS that “at present, developing Asia is showing the strongest growth rates, led by China, and to a lesser extent India.”

But both countries also showed mild downturns in 2009 as compared with much of the rest of the world, he said.

Vos said the picture is more mixed, however, in the rest of the developing world.

While strong growth in Asia is helping pull up exports of other developing countries, and is contributing to the rebound in commodity prices, overall economic performance will depend on the speed of recovery in developed countries, he pointed out.

“Sluggish growth in Europe, the United States and Japan will also moderate the recovery in most of the developing world,” Vos noted.

According to a new U.N. study, there will be a brighter outlook for the world’s developing nations, whose economic growth in 2010 is estimated at 5.3 percent compared with 1.9 percent in 2009.

Still, it falls far below the 7.0 percent growth rate during the pre-crisis days in 2007.

In a 176-page study titled ‘World Economic Situation and Prospects 2010’ (WESP) and released last week, the United Nations says that “some developing economies have rebounded sooner than others.”

Last year, the managing director of the International Monetary Fund (IMF), Dominique Strauss-Kahn, was quoted as saying that “some Asian economies are very good candidates to be the leading economies when things get going.”

“The growth in China is tremendously important for the world economy,” he added.

The U.N. study points out that the world economy is on the mend because an increasing number of countries have registered positive quarterly growth of gross domestic product (GDP) after a sharp, broad and synchronised global downturn in the late 2008 and early 2009.

Still, the overall global economic outlook looks relatively gloomy because of the continued increase in unemployment.

The number of unemployed has more than doubled in the United States since the beginning of the recession in December 2007.

Those out of work totalled 15.7 million in October 2009, bringing the unemployment rate to 10.2 percent, the highest in 26 years.

A report released by the Geneva-based International Labour Organisation (ILO) said Wednesday that the number of jobless people worldwide has risen to a “historic high” of nearly 212 million, or 6.6 percent of the global work force.

“The situation in Europe is likely to worsen before it gets better,” it says.

According to the ILO study, unemployment figures will remain high through 2010 with an additional three million people losing their jobs in the European Union and other industrial economies.

“We need the same policy decisiveness that saved banks now applied to save and create jobs and livelihoods of people,” ILO Director-General Juan Somavia told the annual World Economic Forum in Davos, Switzerland.

Despite the setbacks, said the U.N. study, developing countries as a group were expected to provide net financial resources to developed countries to the tune of some 568 billion dollars in 2009.

While the amount is described as “substantial”, it was notably lower than the all time high of 891 billion dollars in 2008.

In contrast, official development assistance (ODA) from the world’s rich nations to the developing world amounted to only 119.8 billion dollars in 2008 and 103.5 billion dollars in 2007.

Asked what developing nations were playing an important role in the flow of resources from developing to developed countries, Vos told IPS that the net transfers to a large extent reflect the pattern of the global imbalances.

“Hence much of the resource flow comes from major surplus countries to finance imbalances of major deficit countries,” he said.

In 2008, for example, the resource flow came principally from East Asia (lead by China) and the Middle East.

In 2009, it came mostly from East Asia and especially China, which had further increases in trade surpluses, while the surpluses of Middle Eastern oil exporters dwindled with lower export prices and the global crisis.

“The net transfers from developing countries largely flow to finance current account deficits in developed countries, much to the United States,” he added.

Also, Vos pointed out, a large share of the transfers relate to investments of international reserves, much of which in U.S. treasury bills.

“In addition, about one third or so of the net financial transfer, as we define it in the WESP (U.N. study), relates to profit remittances and interest payments on developing country debts,” he noted.

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