New world order is looming – UN report
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.”