The United Nations has said that robustly growing emerging economies in Asia and Latin America would continue to drive global economic recovery for the rest of the year and in 2012.
In its update report on world economic situation and prospects discussed by UN economists in New York on Wednesday, a joint report by the UN Conference on Trade and Development (UNCTAD) and UN's five regional commissions, the UN forecast 3.3 per cent world economic growth in 2011.
This is slightly higher than the 3.1 per cent growth in the annual report and 3.6 per cent growth in 2012.
According to the Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs, Mr Robert Vos, the growth outlook in large emerging economies driving the recovery, notably China, India and Brazil, was moderating due to persistently rising inflation, emerging domestic asset price bubbles and upward pressure on exchange rates, fuelled in part by large inflows of capital.
The Assistant Secretary-General for Economic Development, Mr Jomo Kwame Sundaram, said the breakdown in the past two years of international monetary policy; cooperation and coordination also could dampen recovery prospects.
That lack of coordination had fuelled commodity price volatility, driving up food and energy poverty, which was “a matter of ongoing concern for the United Nations”, Mr Sundaram added.
Giving regional perspective, the UN update report said led by strong performance in India and Sri Lanka, GDP growth in South Asia is expected to average 6.9 per cent in 2011 and 7 per cent in 2012, compared with 7.1 per cent in 2010. Economic prospects vary markedly in the region, ranging from 3 per cent GDP growth in the Iran to 8 per cent in India and Sri Lanka.
Growth drivers
It said while private consumption and investment remain the growth drivers, government consumption has also expanded in most economies.
Exports have rebounded over the past year as demand for textiles and garments, gems and jewellery and engineering goods strengthened. Simultaneously, rising fuel pries and resurgent domestic demand pushed up import bill, leading to a slight widening of trade and current account deficits in most countries.
Inflation has accelerated owing to a sharp increase in commodity prices, combined with aggregate demand pressures and lower fuel subsidies in several countries. The central banks of Bangladesh, Pakistan and India in particular responded by further tightening monetary policy with additional interest rate increases expected in the second quarter of 2011.
The UN report cautioned that “if inflationary pressures continue to rise, authorities might feel a need for more aggressive monetary tightening, which would likely weaken domestic demand and economic growth in the outlook period”.