Tuesday, January 18, 2011

African recovery 'satisfactory'

Economic recovery has been solid in most of Africa, according to a new United Nations report. It is projected to grow by five per cent in 2011 and by 5.1 per cent by 2012.
In the release of its annual report, the World Economic Situation and Prospects 2011 (WESP), the UN emphasises that the outlook remains uncertain and surrounded by serious downside risks. The cooperative spirit among major economies is waning, which has debilitated the effectiveness of responses to the crisis. Uncoordinated monetary responses, in particular, have become a source of turbulence and uncertainty in financial markets. The recovery may suffer further setbacks if some of the downside risks materialize, in which case a double-dip recession is looming for Europe, Japan and the United States.
The economic recovery in the Middle East and other countries in Western Asiais also expected to moderate from 5.5 per cent in 2010 to 4.7 per cent in 2011 and 4.4 per cent in 2012. At this pace, the average annual output growth will be lower than the pre-crisis rate.
The rebound is expected to push through at about 5 per cent per year in 2011 and 2012, but this is well below potential and conditions vary across the region. The economies inEast Africa are showing strong growth, but several of the poorest countries, especially those in the Sahel, have suffered from droughts and conditions of insecurity, which is causing hunger and hampering the recovery of their economies.
Growth in Latin America is projected to remain relatively strong at around 4.0 per cent, though less robust than the GDP growth of 5.6 per cent estimated for 2010. Brazil, the engine of regional growth, continues with strong domestic demand to boost export growth of neighbouring countries. The sub- region also benefits from strengthened economic ties with the emerging economies in Asia.
Developing Asia, led by China and India, continues to show the strongest growth performance, but some moderation (to around 7 per cent) is expected in 2011 and 2012.
The recovery of the world economy has started to lose momentum since the middle of 2010, and all indicators point at weaker global economic growth.
The UN expects that the world economy will expand by 3.1 per cent in 2011 and 3.5 per cent in 2012 – far from sufficient to enable recovering the jobs lost because of the crisis.
Developing countries continue to drive the global recovery, but their output growth is also expected to moderate to six per cent during 2011-2012, down from 7.0 per cent in 2010, because of the slowdown in the advanced countries and phasing out of stimulus measures.
The WESP 2011 says that in the short run more fiscal stimulus will be needed to reinvigorate the recovery, but that it will need to be better coordinated with monetary policiesand reoriented to provide stronger support to employment generation and facilitate a sustainable rebalancing of the global economy. This cannot be done without better international policy coordination. Among developed economies, the US has been on the mend from its longest and deepest recession since World War II. Yet, the pace of recovery has been the weakest in the country’s post- recession experience. At 2.6 per cent in 2010, growth is expected to moderate further to 2.2 per cent in 2011 before improving slightly to 2.8 per cent in 2012, according to the report.
This pace will not make much of a dent in unemployment rates, and recovering the jobs lost during the crisis would take at least another four years. The growth prospects for Europe and Japan are even dimmer, the report says.

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