New world or­der is loom­ing – UN re­port

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

THE BREXIT fall­out and the mar­ket pro­tec­tion­ist pos­ture taken by US Pres­i­dent Don­ald Trump had opened the door for a new world eco­nomic or­der and with de­vel­op­ing economies at most risk of cap­i­tal flight, ac­cord­ing to the UN World Eco­nomic Sit­u­a­tion Prospects 2017 re­port , said Kirsten Thomp­son, the man­ag­ing di­rec­tor of re­search and pro­ject man­age­ment at Plus Eco­nom­ics, who pre­sented the re­port yes­ter­day.

The pro­posed changes by the new US ad­min­is­tra­tion and the un­cer­tain­ties re­lated to Brexit did not bode well for de­vel­op­ing economies.

“These un­cer­tain­ties may also trig­ger cap­i­tal with­drawal from de­vel­op­ing economies with open cap­i­tal mar­kets such as Mex­ico, South Africa and Turkey,” the re­port said.

The re­port also noted that pol­icy pro­pos­als of the new US ad­min­is­tra­tion would slow eco­nomic growth and other coun­tries might take re­tal­ia­tory pol­icy mea­sures.

Thomp­son said the world might well be about to wit­ness the end to glob­al­i­sa­tion and this might lead to “African pro­tec­tion­ism”.

“We are now en­ter­ing an un­known, untested era eco­nom­i­cally. There is no eco­nomic model for what I be­lieve we will see in the next year or two in the global econ­omy with the su­per pow­ers com­pletely alien­at­ing them­selves. The glob­al­i­sa­tion cy­cle trend of the 1990s is end­ing,” Thomp­son said.

The UN re­port found that the South African econ­omy was pro­jected to grow by 1.3 per­cent this year and by 2 per­cent next year.

Ian Cruick­shanks, the chief economist at the SA In­sti­tute of Race Re­la­tions, said the move by the new US pres­i­dent meant the US was likely to trade with coun­tries that had de­clin­ing busi­ness prospects.

“He is less in­ter­ested in glob­al­i­sa­tion and this means there will be less trade ben­e­fits for coun­tries such as South Africa. It is go­ing to be dif­fi­cult for African coun­tries and the Brics group,” Cruick­shanks said.

The UN ex­pects Africa’s econ­omy to grow by a mod­er­ate 3.2 per­cent this year and 3.8 per­cent in 2018, with East Africa ex­pected to grow at 6 per­cent in the next two years.

The an­tic­i­pated growth on the con­ti­nent was due to the ex­pected up­ward trend in global oil and non-oil com­mod­ity prices.

How­ever, global com­mod­ity prices were ex­pected to re­main well be­low the pre-2014 lev­els.

The world gross do­mes­tic prod­uct was fore­cast to ex­pand by 2.7 per­cent this year and 2.9 per­cent in 2018, the re­port said. The UN at­trib­uted this slug­gish growth to weak global in­vest­ment, dwin­dling world trade growth and high lev­els of debt.

Thomp­son said in­vest­ments in in­fra­struc­ture growth lev­els and dwin­dling trade lev­els meant there would be stag­nat­ing eco­nomic growth for the fore­see­able fu­ture.

“Un­less we boost in­vest­ment lev­els, we will not be able to grow above this stag­nat­ing growth rates. We cur­rently have one of the low­est global trade lev­els in 30 years.”

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.