While the momentum of global economic expansion is expected to slow from 4.1% last year to about 3% this year and next year, the United Nations report said developing countries and former Soviet bloc countries will experience stronger economic growth.
“The slowdown forecast for 2005-2006 is similar to that expected at the end of 2004, with the deterioration almost entirely concentrated in the developed countries,” said the report, titled UN World Economic Situation and Prospects as of mid-2005.
“Growth in Western Europe is expected to be less than previously forecast, but the situation is the opposite in developing countries.”
On Wednesday UN Undersecretary-General for Economic and Social Affairs Jose Antonio Ocampo introduced the report, saying: “we see much more uniform growth in all developing country regions than probably at any time since the 1970s.”
These poorer countries are experiencing a very unusual set of circumstances that are spurring economic growth, he said.
World trade expanded 11% last year and is expected to grow by 8% this year.
Prices for oil and other commodities are high which helps many parts of the developing world. Financial markets have been performing well. Foreign investment has increased and the costs of external financing are at historic lows, Ocampo said.
“Chinese-led world economic growth on top of US-led [growth] which has been the characteristic in previous years is very favourable for developing countries due to the very specific effect of commodity prices,” he said, stressing “the importance of China as an importer of raw materials.”
High oil prices helped growth in
The report forecast that developing countries’ economies which surged by 6.6% in 2004 will still experience strong growth averaging 5.75% in the next two years, while former Soviet bloc economies, which surged 7.6% in 2004, will experience 6% growth in 2005 and 5.25% in 2006.
In south Asia, the UN report said the 7% growth rate in 2004 is likely to be replicated in 2005 and 2006, while east Asia’s 7.5% growth last year is expected to slow to 6.75% this year and next year.
Sub-Saharan Africa, whose economies grew at 5.5% last year, could see even faster expansion this year to over 5.75% and next year to 6% though the more than 3% annual population growth could absorb much of the positive impact, the report said.
Nonetheless, Ocampo said this was “one of the most promising trends in the world economy” because sub-Saharan Africa needs economic growth of 6-7% a year to meet UN development goals that include cutting extreme poverty by half, ensuring universal primary education, and stemming the AIDS pandemic, all by 2015.
By contrast, developed economies which grew by 3.3% in 2004 will expand by just 2.5% in the next two years, the report said.
It said North America’s economic growth will fall from 4.3% in 2004 to 3% this year and next year and Western Europe‘s will fall from 2.4% last year to 2% in 2005 and 2.25% in 2006.
The UN said the major risks to continued global growth are trade imbalances and high oil prices.