After expanding by 5.5 per cent in 2021, the global output is projected to grow by only 4 per cent in 2022 and 3.5 per cent in 2023, according to the United Nations World Economic Situation and Prospects (WESP) 2022 which was launched.
The UN WESP 2022 was launched on Thursday. The report said that the global economic recovery is facing significant headwinds amid new waves of Covid-19 infections, persistent labor market challenges, lingering supply-chain challenges and rising inflationary pressures.
The robust recovery in 2021 -- driven by strong consumer spending and some uptake in investment, with trade in goods surpassing pre-pandemic levels -- marked the highest growth rate in more than four decades, the report highlighted.
Yet the momentum for growth -- especially in China, the US and the European Union -- slowed considerably by the end of 2021, as the effects of monetary and fiscal stimuli began to recede and major supply-chain disruptions emerged. Rising inflationary pressures in many economies are posing additional risks to recovery, Xinhua news agency reported.
"In this fragile and uneven period of global recovery, the World Economic Situation and Prospects 2022 calls for better targeted and coordinated policy and financial measures at the national and international levels," said UN Secretary-General Antonio Guterres.
He added that "the time is now to close the inequality gaps within and among countries. If we work in solidarity -- as one human family -- we can make 2022 a true year of recovery for people and economies alike."
With the highly transmissible Omicron variant of Covid-19 unleashing new waves of infections, the human and economic tolls of the pandemic are projected to increase again.
"Without a coordinated and sustained global approach to contain Covid-19 that includes universal access to vaccines, the pandemic will continue to pose the greatest risk to an inclusive and sustainable recovery of the world economy," Liu Zhenmin, UnderSecretary-General of the UN Department of Economic and Social Affairs, said at the hybrid press briefing on the launch of the World Economic Situation and Prospects 2022.
Employment levels are projected to remain well below pre-pandemic levels during the next two years, and possibly beyond. Labor force participation in the US and Europe remain at historically low levels, as many who lost jobs or left the labor market during the pandemic have not yet returned, according to the report.
Labor shortages in the developed economies are adding to supply-chain challenges and inflationary pressures. At the same time, employment growth in developing countries remains weak, amid lower vaccination progress and limited stimulus spending. Africa, Latin America and the Caribbean, and Western Asia are projected to see a slow recovery of jobs.
In many countries, the pace of job creation is not enough to offset the earlier employment losses. Against the backdrop of weak job recovery, the number of people living in extreme poverty is projected to remain well above pre-pandemic levels, with poverty projected to increase further in the most vulnerable economies. In Africa, the absolute number of people living in poverty is projected to rise through 2023.
The report said that higher levels of inequality within and between countries are emerging as a longer-term scar of the pandemic. In the coming years, a full recovery of GDP per capita will remain elusive for many developing countries. Africa and Latin America and the Caribbean are projected to see gaps of 5.5 and 4.2 percentage points, respectively, compared to pre-pandemic projections.
These persistent output gaps will exacerbate poverty and inequality and thwart progress on achieving sustainable development and tackling climate change. In contrast, the GDP per capita of the developed economies, relative to pre-pandemic projections, is expected to almost fully recover by 2023.
Furthermore, uneven recovery of employment and income across different population groups are exacerbating within-country income inequalities. Women, especially in developing countries, experienced a sharper decline in employment as a result of the pandemic. Support for unpaid domestic work, including childcare, will remain critical in helping women re-enter the labor force, the report added.
'India's recovery is on a solid path', is world's top economic performer: UN report
"India's recovery is on a solid path", the UN said on Thursday reporting that the country recorded the highest estimated growth rate among the major economies last year and is set to be on the same trajectory during this year and the next.
The UN's annual World Economic Situation and Prospects (WESP) report estimated the growth rate of India's gross domestic product (GDP) at 9 per cent last year and forecast it to moderate to 6.7 per cent this year and 6.1 per cent next year but still retain the highest growth rates among the large economies.
In 2020, the year Covid-19 pandemic struck the world, India's economy had shrunk by 7.1 per cent - a negative growth rate - according to the report.
China, which came next among the large economies, was estimated to have grown by 7.8 per cent last year and forecast to grow by 5.2 per cent this year and 5.5 per cent next year.
Overall, the global economy's growth was estimated to be 5.5 per cent last year, bouncing back from a shrinkage of 3.4 per cent in 2020.
The growth projections are 4 per cent this year and 3.5 per cent in 2023.
The report said: "India's economic recovery is on a solid path, amid rapid vaccination progress, less stringent social restrictions and still supportive fiscal and monetary stances."
The WESP raised India's growth estimate for last year by 1.7 per cent and the growth projection for this year by 0.8 per cent from the expectations in its report a year ago.
It ascribed slowing down of growth from 9 per cent last year to 6.7 per cent this year to waning base effects.
While "robust export growth and public investments underpin economic activity", the WESP warned that "high oil prices and coal shortages could put the brakes on economic activity in the near term".
"It will remain crucial to encourage private investment to support inclusive growth beyond the recovery," it advised.
"Inflation is expected to decelerate throughout 2022, continuing a trend observed since the second half of 2021 when relatively restrained food prices compensated for higher oil prices," the report said while attaching a note of caution: "A sudden and renewed rise in food inflation, however, due to unpredictable weather, broader supply disruptions and higher agricultural prices, could undermine food security, reduce real incomes and increase hunger across the South Asia) region."
The report estimated India's consumer price inflation at 5.9 per cent last year and projected to go down to 5.6 per cent this year and 5.3 per cent next year.
The WESP said that it expected the Reserve Bank to raise interest rates throughout this year.
In its snapshot of the world economy, the report said: "The global economic recovery is facing significant headwinds amid new waves of Covid-19 infections, persistent labour market challenges, lingering supply-chain challenges and rising inflationary pressures."
"The momentum for growth - especially in China, the United States and the European Union - slowed considerably by the end of 2021, as the effects of monetary and fiscal stimuli began to recede and major supply-chain disruptions emerged," according to the report.
Assessing the scenario in the report, Secretary-General Antonio Guterres said: "In this fragile and uneven period of global recovery, the World Economic Situation and Prospects 2022 calls for better targeted and coordinated policy and financial measures at the national and international levels."
The 46 countries classified as the least developed are estimated to grow by only 1.4 per cent this year, according to the WESP.
"The time is now to close the inequality gaps within and among countries. If we work in solidarity - as one human family - we can make 2022 a true year of recovery for people and economies alike," Guterres said.
The WESP painted a mixed picture for South Asia.
"Amid sound macroeconomic policies, Bangladesh has navigated the Covid-19 pandemic relatively well" and its "GDP is projected to expand by 6 per cent in 2022", the report said.
Its "economic activity rides on export growth and the rising demand for apparel, robust remittance inflows, and accommodative fiscal and monetary policies", it added.
Pakistan's economy after an economic expansion of 4.5 per cent in 2021, is projected to grow by 3.9 per cent in 2022 "driven by private consumption, record-high remittances and fiscal support", according to the report.
But for Sri Lanka, the WESP projected a GDP growth of 2.6 per cent for this year and said that "its major challenges include food shortages, dwindling foreign reserves and sovereign debt risks".
Among the developed countries, the UK was projected to be the top performer with a 4.5 per cent GDP growth this year, after a 6.2 per cent estimated growth last year.
The European Union' growth was estimated at 4.7 per cent last year and projected to be 3.9 per cent this year.
For the United States, the report estimated the growth at 5.5 per cent last year and projected it to be 3.5 per cent this year.
While the WESP used the calendar year calculations for the report to enable comparisons between countries, it also gave this growth picture for India on a fiscal year basis - 2020-2021: -(minus)10.6 per cent; 2021-22: 8.4 per cent; 2022-223: 6.5 per cent, and 2023-24: 5.9 per cent