While inflation is on the rise, the global economy is slowing down and heading for a recession : warns UN report
Anrew Pirana
Oct. 6, 2005

According to media release, rising oil prices and trade imbalances are combining with natural disasters and geopolitical instability to slow the global economy, a senior United Nations official has told a General Assembly committee.

Growth will decelerate in 2006 to three per cent, impacting the ability of developing countries to reach the global anti-poverty targets known collectively as the Millennium Development Goals (MDGs), Under-Secretary for Economic and Social Affairs Josi Antonio Ocampo told the Economic and Financial Committee.

And the reluctance by some world players to adjust trade and financial imbalances could further add to uncertainty and risk in the world outlook, he said.

"At the same time, the broad international economic environment does show some auspicious signs," Ocampo said, citing robust growth in international trade as well as trade surpluses for some developing countries.

He predicted "a major breakthrough" if development commitments are fully met, particularly for sub-Saharan Africa, where aid is expected to double from 25 billion dollars in 2004 to 50 billion dollars by 2010.

But other indicators point to a destabilization of the world economy, including the unraveling of housing prices in developed economies, a significant rise in long-term interest rates, and the reduction in the risk appetite of financial markets, he said.

Ocampo said the global economy had declined measurably during 2005 compared to a strong and broad expansion in 2004, and projections of future growth were fraught with uncertainty and risk.

The decline, he added, was due partly to enormous global imbalances, including the rising external deficit of the United States on the one hand, and growing surpluses in the Asian, European and oil-exporting economies on the other.

Taken together with rising oil prices, and exacerbated by natural disasters and geopolitical instability, the global economic environment could threaten immediate and longer-term growth in developing countries.

During the ensuing discussion, speakers from several oil-producing countries noted that increasing demand for energy, reduced refinery capacities caused by natural disasters, and a failure by some advanced countries to renew oil-producing technologies, which affected the supply of oil by-products, had all pushed up the price of oil.

The oil-refining sector in the United States had faced significant constraints due to the recent natural disaster, they said and expressed the hope that oil-producing and oil-consuming countries would cooperate in resolving the situation.

While inflation is on the rise, the global economy is slowing down and heading for a recession : warns UN report
Anrew Pirana
Stagflation is getting its hold on the world economy....
READ MORE>>

The inflation part of stagflation has started in full vigor while the other end of recession is about to start – central banks trapped like never before
Kim Marbani
The rising energy prices, the escalating commodity prices, exploding demand of cheap raw materials in India and China and imploding deflation in wages in the Western world have caused a scenario never scene or imagined before...
READ MORE>>

MORE ARTICLES >>