World Economic Situation and Prospects (WESP)The United Nations (UN) released Mid-2015 World Economic Situation and Prospects (WESP) update.
In the release, it has highlighted that world economy continues to grow at a modest pace.
It characterized the current world economic situation by five lows and they are low growth, low trade flows, low inflation, low investment, and low interest rates, combined with two highs: high equity prices, and high debt levels.
Growth prospects for World Economy
- Growth of world GDP will accelerate slightly from 2.6 percent in 2014 to 2.8 percent in 2015.
- This projection is a downward revision by 0.3 percentage points from the forecast presented in the World Economic Situation and Prospects 2015 in January 2015.
- In 2016, the global growth would improve to 3.1 percent.
- The growth divergence between various regions is widening in 2015, owing to differing impacts from the recent decline in the prices of oil and other commodities, as well as country-specific factors.
Growth in Developed Economies
- The growth momentum in the developed economies is picking up.
- The major developed economies will see growth at a rate of 2.2 percent in 2015 from 1.6 percent in 2014.
- These nations still faces considerable headwinds from the legacies of the global financial crisis, like subdued employment levels, elevated private and public sector debt and financial sector fragilities.
Growth prospects in Economies in transition
- Growth of these economies has been downgraded against backdrop of low oil prices.
- Gross Domestic Product (GDP) of these economies in transition will contract by 2 percent in 2015.
- The release suggests that the Russian economy will shrink and its impact would have a negative spillover effects on other countries of the region.
Growth prospects in developing economies
- The report predicts that growth in these economies will diverge. The average growth of the developing nations will remain at 4.4 percent in 2015, which is 3 percentage points below the pre-crisis pace.
- In Africa, there seems to be a strong divergence between oil-exporting and oil-importing economies. It may face a mixed picture, which will be caused due to falling commodity prices and declining exchange rates. It may register to see average growth at 4 percent in 2015 and 4.8 percent in 2016.
- In South Asia, the economic outlook has been painted as favourable, as most of the economies would experience strengthening of growth in 2015-2016. This growth will be strengthened on the back of stronger domestic consumption and investment, and a pick-up in exports.
- In Western Asia, nations which are termed as diversified economies would perform better than anticipation, but it may face fiscal pressures along with aggravating growth prospects for 2016, if the oil prices remain at the current low level for an extended period in the oil exporting economies
- Latin America and the Caribbean is expected to grow by only 0.5 percent in 2015 and by 1.7 percent in 2016 due to lower commodity prices and persistent domestic fragilities. The Bolivarian Republic of Venezuela will fall into a deeper recession, while Brazil and Argentina are expected to experience slight contractions.
Growth in Least Developed Countries (LDCs)
- The region is expected to grow at 4.9 percent in 2015, which is deceleration from 5.2 percent in 2014.
- Some LDCs like Ethiopia, Rwanda and Tanzania will see a robust and sustained economic growth.
- They will see a robust and sustained growth owing to investments in agriculture and infrastructure, expanding services sectors and rising domestic demand.
Growth prospects in India
- In context of India, the report says that it will grow by 7.6 percent in 2015 and 7.7 percent in 2016, which means that it will surpass the growth of China, which will grow at 7 percent in 2015 and 6.8 percent in 2016.
Conclusion
- WESP mid-2015 update identifies key challenges in the areas of monetary, fiscal, labour market and trade policies, and underlines the need for strengthened international policy coordination.
- Such coordination becomes ever more critical as the Member States of the United Nations are expected to adopt a new financing framework for sustainable development and an ambitious post-2015 sustainable development agenda.
