United Nations, 2 July 1999 (RFE/RL) -- The United Nations says the world economy will grow by only 2 percent this year, leaving behind 1.5 billion people -- or a quarter of the world's population -- living on less than a dollar a day.
Economic growth rates in the developing world are their lowest in the nineties, the UN's report "The World Economy in 1999" says. It was made public Thursday.
"The financial crises of the past two years, and ensuing economic slowdowns, have dealt a stunning blow to world development prospects," said Nitin Desai, UN Undersecretary General for Economic and Social Affairs.
The report says the dollar value of world trade fell in 1998 for the first time in the decade. Trade grew by only 3.5 percent, less than half the 1997 rate. Commodity prices, upon which many developing countries depend, remain depressed.
The Asian economic crisis caused an inflow of $31 billion into the region in 1996 to become an outflow of $110 billion last year, the report says. Asian currencies fell between 20 to 80 percent from 1997 to 1998.
"What the crises have done is to delay or push back the movement of people from poverty into the more modern commercial sectors," the report says. Continuing globalization and liberation of the world economy should have brought increases in employment and business expansion. Instead the Asian and Russian financial crises "have put at risk the continued expansion of the more modern sector in these countries."
The good news is that decline in the world economy has stopped. "Financial markets have stabilized, there are clear signs of recovery in Asia, but we do see continued weakness in the CIS countries (former Soviet Union) and Latin America," Desai says. "What has kept the world economy going is the continued growth in North America and Europe."
The projected 2 percent world growth rate is a slight improvement over last year's 1.9 percent. "Led by the easing of monetary policy in major developed economies since the autumn of 1998, economic prospects have improved and global financial markets have shown signs of stabilization," the report says.
Contagion from the Brazilian currency crisis has been contained and investments to emerging markets have resumed, according to the report. Oil prices, at their lowest prices in more than a decade, have begun to climb and other commodity prices remain low but have ceased to fall further.
However, the "outlook for the rest of 1999 and beyond suggests only a minor overall improvement and in a number of cases, the economic situation continues to deteriorate," says the report.
"In the majority of countries, growth for the foreseeable future will fall far short of what is necessary to effect a substantial improvement in living standards and a reduction in the number of people living in poverty," the report says.
Developed nations saw a rise in economic output per head, except in Japan and New Zealand. But in the developing world, 95 countries experienced a decline in per capita output. "About one person in four in the developing world, roughly 1.2 billion people, lived in countries that suffered a decline in per capita output in 1998," the report says. In 1996, only 160 million people were so effected.
Though financial indicators may show recovery in Asia and Russia, the long-term economic impact on the lives of ordinary people will take much longer to overcome, the report says. "Recovery in employment and real wages, and reversing the social setbacks brought about by the economic crisis will trail well behind the resumption of output of growth," the study says.
And the report warns that without systemic reforms in the global financial system, the world economy "remains highly vulnerable to future international crises."
Cutbacks in government contributions to the UN Development Program have not helped either, said UNDP's new director, Mark Malloch Brown. "For an organization that should be in the forefront in the fight against world poverty, it's a moment to confront why we are not being given the resources." Brown said developed countries have contributed less because of the crisis in Kosovo and budgetary restraints imposed by the European agreement on a common currency.