UNITED NATIONS -- The world economy will continue to grow at a modest pace, with a gradual improvement projected for the second half of 2015 and 2016, according to the United Nations World Economic Situation and Prospects (WESP) mid- year report, launched here on Tuesday.
"Growth of world gross product is projected to improve slightly from 2.6 percent in 2014 to 2.8 percent in 2015 -- a downward revision by 0.3 percentage points from the forecast presented in the World Economic Situation and Prospects 2015 in January," it said.
The downward revision reflects mainly deterioration in the prospects of the economies in transition and several large developing countries, especially in South America. In 2016, global growth is forecast to improve to 3.1 percent, which is still well below the pre-crisis pace, according to the report.
"The current world economic situation is characterized by five 'lows': low growth, low trade flows, low inflation, low investment, and low interest rates, combined with two 'highs': high equity prices and high debt levels," said Hong Pingfan, director of the Development Policy and Analysis Division (DPAD) of the United Nations Department of Economic and Social Affairs.
The report notes that the growth divergence between the various regions will likely widen this year. WESP attributes this in part to the differing impacts from the recent drop in the prices of oil and other commodities.
Therefore, the short-term growth prospects of most commodity- exporting economies have been downgraded; by contrast, commodity- importers tend to benefit from the lower prices in the form of reduced inflationary, fiscal and balance-of-payment pressures.
According to the report, there are still significant downside risks to the forecast related to the impact of the upcoming monetary policy normalization in the United States, ongoing uncertainties in the euro area, potential spillovers from geopolitical conflicts and persistent vulnerabilities in emerging economies.
The overall subdued performance of the world economy since the global financial crisis has raised concerns of a "new normal" of lower growth. The broad-based weakness in investment worldwide not only holds back current growth, but also reduces potential growth in the future, it said.
"It is somewhat concerning that, despite highly accommodative monetary policies and historically low global interest rates, real investment has been weak in many parts of the world since the global financial crisis," said Ingo Pitterle, the DPAD's team leader for the report.
Almost all major developed economies are expected to see the growth momentum picking up, with average growth projected to accelerate from 1.6 percent in 2014 to 2.2 percent in 2015, according to the report.
In developing countries, average growth is expected to remain at 4.4 percent, about 3 percentage points below the pre-crisis pace, it said.
In particular, most economies in South Asia are expected to experience a strengthening of growth in 2015-2016 on the back of stronger domestic consumption and investment, and a pick-up in exports.
India is now projected to grow by 7.6 percent in 2015 and 7.7 percent in 2016, surpassing the growth of China, which is pegged at 7 percent in 2015 and 6.8 percent in 2016.
As for policy recommendations, WESP underscored the need for strengthened international policy coordination as the member states of the United Nations are expected to adopt a new financing framework for sustainable development, an ambitious sustainable development agenda, and a universal agreement on climate change later this year.
