Prospects for economic growth in 2020 hinge on reducing trade disputes and uncertainty, WESP report finds

Impacted by prolonged trade disputes, the global economy suffered its lowest growth in a decade, slipping to 2.3 percent in 2019. The world, however, could see a slight uptick in economic activity in 2020 if risks are kept at bay, according to the United Nations World Economic Situation and Prospects (WESP) 2020.

The report states that the growth of 2.5 percent in 2020 is possible, but a flareup of trade tensions, financial turmoil, or an escalation of geopolitical tensions could derail a recovery. In a downside scenario, global growth would slow to just 1.8 percent this year. A prolonged weakness in global economic activity may cause significant setbacks for sustainable development, including the goals to eradicate poverty and create decent jobs for all. At the same time, pervasive inequalities and the deepening climate crisis are fueling growing discontent in many parts of the world.

UN Secretary-General António Guterres warned that “these risks could inflict severe and long-lasting damage on development prospects. They also threaten to encourage a further rise in inward-looking policies, at a point when global cooperation is paramount.”

In the United States, recent interest rate cuts by the US Federal Reserve may lend some support to economic activity. However, given persistent policy uncertainty, weak business confidence and waning fiscal stimulus, GDP growth in the United States is forecast to slow from 2.2 percent in 2019 to 1.7 percent in 2020. In the European Union, manufacturing will continue to be held back by global uncertainty, but this will be partially offset by steady growth in private consumption, allowing a modest rise in GDP growth from 1.4 percent in 2019 to 1.6 percent in 2020.

Despite significant headwinds, East Asia remains the world’s fastest-growing region and the largest contributor to global growth, according to the report. In China, GDP growth is projected to moderate gradually from 6.1 percent in 2019 to 6.0 percent in 2020 and 5.9 percent in 2021, supported by more accommodative monetary and fiscal policies. Growth in other large emerging countries, including Brazil, India, Mexico, the Russian Federation and Turkey, is expected to gain some momentum in 2020.

Economic growth while limiting carbon emissions is possible by changing the energy mix

To combat climate change, the world’s growing energy needs must be met with renewable or low-carbon energy sources. This will require massive adjustments in the energy sector, which currently accounts for about three-quarters of global greenhouse gas emissions. If per capita emissions in developing countries were to rise towards those in developed economies, global carbon emissions would increase by more than 250 percent – compared to the global goal of reaching net-zero emissions by 2050.

The urgency of energy transition continues to be underestimated, resulting in short-sighted decisions such as expanding investment in oil and gas exploration and coal-fired power generation. This not only leaves many investors and Governments exposed to sudden losses but also poses substantial setbacks to environmental targets. Any delay in decisive action towards energy transition could double the eventual costs. The transition to a cleaner energy mix will bring not only environmental and health benefits but economic opportunities for many countries.

Read and download the report: World Economic Situation and Prospects 2020

Original source: United Nations
Published on 16 January 2019