From Isaac Anumihe, Abuja
As the Ukraine-Russian war continues, the United Nations Conference on Trade and Development (UNCTAD) has projected a global economic downturn from the earlier predicted 3.6 per cent to 2.6 per cent this year.
According to the Director, UNCTAD Division on Globalisation and Development Strategies, Richard Kozul-Wright, the Russian invasion of Ukraine is the main contributing factor to the potentially devastating one per cent drop in projected global economic growth this year.
‘We anticipated back in September of last year that the global economy would grow by around 3.6 per cent. We expect it to grow by 2.6 per cent this year and, of course, the main contributing factor to that is the war in Ukraine,’ Kozul-Wright stated.
He said that with inflation on the rise and developing countries already weighed down by a $1 trillion debt burden to pay back to creditors, the UN body decried the inadequate financial measures already taken to help them withstand exchange rate instability, rising interest rates and soaring food and fuel prices.
‘Wholesale multilateral fiscal reform – possibly on the scale and ambition of the US Marshall Plan that shouldered Western Europe following the Second World War – is urgently needed to improve the financial liquidity of developing countries to prevent them – and even middle-income countries – from potentially going under,’ the UNCTAD director said, as he appealed to the International Monetary Fund (IMF) and World Bank to assist the developing countries.
Confirming the position of the director, UNCTAD Secretary-General, Ms Rebeca Grynspan, stated that there is a rapidly worsening outlook for the world’s economy and that this year, the year after two years of crisis with COVID-19, the average rate of growth of the world economy will be 2.6 per cent, down from 5.5 per cent last year, and down from the projections that were made in the last quarter of 2021.
In particular, Grynspan called for emergency measures from the IMF and World Bank, to activate rapid funding instruments which the IMF can provide to help countries with looming balance of payments problems.
‘Conditions are worsening for everybody,’ continued the UNCTAD chief, noting how the climate crisis has played its part, along with successive droughts in the Horn of Africa, the ongoing COVID-19 pandemic and war in Ukraine.
Even relatively wealthy countries that are struggling with multiple cost-of-living pressures, she said, have already sought help from the international system to keep them afloat.
‘Pakistan went back (to the IMF) at the end of last year. Sri Lanka has now gone to the IMF to organise a programme. Egypt, which was already under a programme, has gone back to the IMF to renegotiate. And these are countries – these are not least developed countries; these are middle-income countries that are under very serious economic and in some cases political pressure, as a consequence of the shocks that they now face,’ Kozul-Wright noted.
UNCTAD further explained that the world’s poorest, import-dependent countries will be the worst hit by the global economic downturn.
‘The brunt is being carried by the developing countries because of the rise in prices of food, of energy and fertilisers that is very steep and also the financial stretch under which the developing countries are already” the world’s body, said, adding that although all regions of the global economy will be adversely affected by this crisis, high commodity exporters were likely to do well from a rise in prices.
‘But the European Union will see a fairly significant downgrade in its growth performance this year…so will parts of central and southern Asia as well,’ the body said.
UNCTAD’s policy recommendations include the need for global financial reform to allow developing countries the economic space for ‘reasonable growth’ so that they can service potentially crippling debt levels.
Meanwhile, debt servicing in 2020 for developing countries excluding China was already $1 trillion.
‘We know and we have argued in the past that the initiatives from the G20, the Debt Service Suspension Initiative is welcome. We welcomed it, but it was clearly insufficient. It provided something of the order of $11 billion for the countries that were eligible,’ UNCTAD observed.