UN: World Growth Expected to Remain Steady in Coming Years

The 2018 edition of the World Economic Situation and Prospects report, WESP2018, was launched in Addis Ababa on January 16 under the auspices of the macroeconomic policy division of the United Nations Economic Commission for Africa.

WESP, which is a UN flagship publication on expected trends in global economy, was presented to a group of Ethiopia-based journalists by Khaled Hussein, chief of ECA’s forecasting section, who said the report bears “some good news and some worrying news, ” CNBCAfrica reported.

The good news in this report, he said, is that “After a long period of stagnation, global economic growth reached 3% in 2017–the highest growth rate since 2011–and the growth is expected to remain steady in the coming years.”

Citing the report, Hussein said that global financial markets were “remarkably buoyant in 2017” and that investment conditions improved, providing opportunity for countries to focus policy towards long-term issues such as reducing inequalities, economic diversification and eliminating deep-rooted barriers to development.

As for the “worrying news”, Hussein said, “very few least developed countries are expected to reach the SDGs target for growth of at least 7% because LDCs continue to be hindered by institutional deficiencies, inadequate basic infrastructure, high levels of exposure to natural disasters as well as political instability and challenges to security.”

Africa Region's Recovery  

Africa as a whole is expected to see a recovery in GDP growth from its current 3.0% to 3.5% in 2018, and 3.7% in 2019, according to the report. WESP2018 notes, however that GDP growth on a per capita basis is “negligible in several African sub regions, namely Central, Southern and West Africa, in 2018-2019.” These regions combined are home to nearly one third of the global population living in extreme poverty.

East Africa, on the contrary, is noted in the report as being the “fastest growing sub region on the continent, with GDP growth of 5.3% in 2017.

Ethiopia is said to be leading the growth performance in East Africa despite continued weak global prices for its key exports and a re-emergence of drought conditions in parts of the country. The country’s economic growth for 2017 is estimated at 7.3% and is expected to rise to 7.5% in 2019.

The drivers of such growth in Ethiopia, said Hussein, “are mainly the strong domestic consumption, increase in investments and government expenditure on infrastructure such as roads, energy and the construction of industrial parks for expansion of the industrial sector,” among others.

WESP is produced annually by the UN Department of Social Affairs, the UN Conference on Trade and Development, the five UN regional commissions and the World Tourism Organization.

The report calls for renewed efforts to decrease the over-reliance on commodity revenues through economic diversification and structural transformation.

Good News for Asia

Global economic sentiment has become far more upbeat this year—an assessment endorsed by most international organizations.

The broad recovery in investment, manufacturing and trade is good news for Asia's trade-dependent economies which have benefited from strengthening global demand.

While there are short-term risks, including financial stress and rising geopolitical tensions, the key question now is how long this pickup will last. Concerns linger over longer-term challenges like flagging productivity and ageing populations.

A number of international organizations have forecast stronger growth for the year ahead.

In a report earlier this month, the World Bank said it expects the global economy to grow by a stronger than expected 3.1% this year as more than half of the economies accelerated.

Since its last report in June, the World Bank has upgraded nearly all of its forecasts. The brighter outlook comes as "the global economy is experiencing a cyclical recovery, reflecting a rebound in investment, manufacturing activity and trade", the report said.

This means 2018 is on track to be the first year since the financial crisis that the global economy will be operating at or near full capacity, the World Bank noted. It expects growth to hit 3% next year.

Separately, the International Monetary Fund forecast in October that the world economy will grow 3.7% this year, the fastest pace since 2011. It will update its forecasts at the Davos gathering of world leaders later this month.