| Developing and developed economies recover at different speeds, UNCTAD report claims |
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According to the 2011 Trade and Development Report, released by the UN Conference on Trade and Development (UNCTAD) last week, developed countries are recovering more slowly from the economic crisis than developing ones. Despite widespread announcements of economic and financial system reforms, little has changed, the report concludes. The report, entitled “Post-crisis Policy Challenges in the World Economy” points to a “two-speed recovery” process, emphasising that while developing countries could sustain their strong growth rates, those rates have been stagnating in developed economies. Fiscal austerity measures have resulted in a decline in domestic demand, stagnating wages and little improvement in employment in developed countries, the report reads. While developing economies could resume their pre-crisis economic growth trends that amount to 6% this year, developed economies are expected to grow between 1.5 and 2% only. Shifting fiscal policy stance from stimulus to retrenchment risks leading to prolonged stagnation in developed countries, or even to a contraction of their economies, while developing countries can maintain their growth momentum thanks to the recovery of commodity prices. Despite this positive trend, developing countries continue to be affected by financial instability and speculative capital flows generated in developed economies, UNCTAD warns. Measures to address this instability have however been slow and inadequate, the report continues, pointing to a lack of action of governments in developed economies. “So far, the process of re-regulation of the financial systems has been slow and inadequate to cover the shadow banking system and to cope with a highly concentrated financial sector that is dominated by a small number of gigantic institutions”, the report reads. UNCTAD also warns against regarding fiscal tightening measures as an appropriate measure to overcome the crisis, as it “only addresses the symptoms of the problem, leaving the basic causes unchanged”. If the international community is to overcome the financial and economic crisis, it should thus rather focus on fiscal policy that supports growth, being more likely to curb public debt ratios and reducing fiscal deficits, the report concludes. Read the full report here: UNCTAD The London School of Economics and Political Sciences organized a discussion on the report. To listen to the discussion, click here: LSE - London School of Economics and Political Science Sources:  |
