UN warns that a prolonged period of low economic growth will hinder progress in sustainable development. It urges countries to increase investment to combat the climate crisis.
The annual report on the state of global economics presents a somber outlook for growth, as countries struggle with higher borrowing costs and geopolitical tensions.
The World Economic Situation and Prospects report predicts that global growth will slow down to 2.4% in this year, from 2.7% last year. This is significantly lower than the pre-Covid trend of 3%.
The warning comes at a time when leading central banks are continuing to use high interest rates to combat the most severe inflationary surge in decades, following the economic impact of pandemics and Russia’s invasion in Ukraine.
The report warned that slow economic growth could hinder progress in achieving the UN’s Sustainable Development Goals, which include ending global warming and tackling poverty. It said more international collaboration was needed to promote growth and the green transition.
Antonio Guterres said that 2024 is the year we will finally escape this quagmire. We can achieve sustainable development, climate action and a stronger global economy by unlocking bold, big investments.
The latest forecasts show global inflation is projected to decline from about 5.7% in 2023 to 3.9% this year, helping to ease the pressure on households and businesses. However, the report warns price pressures remain elevated, while sounding the alarm that any further escalation of geopolitical conflicts risks a renewed inflationary burst.
The UN’s findings are in line with concerns about the disruption of shipping along the Red Sea trade route following attacks launched by Houthi rebels in response to Israel-Gaza conflict amid a tense diplomatic climate in Middle East.
The economists warn that a sustained disruption in shipping or a conflict in the region with Iran or the closing of the Strait of Hormuz – an important route for the shipments of gas and oil – , could significantly increase global inflation.
The UN stressed that it was important for governments to avoid “self-defeating” fiscal consolidations and instead offer more financial assistance to stimulate economic development at a period when central banks kept interest rates high.
“Global climate finance needs to be scaled up massively.” It said that reducing – and eventually eliminating- fossil fuel subsidies and following through with international financing commitments such as the pledge of $100bn to support developing nations, and promoting technological transfer were critical for strengthening global climate action.