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UN Report Grim Outlook For Global Economy in 2011
The recovery from the global economic crisis has been faced with setbacks since the middle of 2010 and the outlook for growth in 2011 remains grim, stated a new UN report pre-released Wednesday.
The annual UN report titled the "World Economic Situation and Prospects 2011 (WESP)" pointed to high unemployment rates, fiscal tightening and the risk of global currency wars as the primary threats to global economic recovery. The full report will be released in 2011.
According to UN expectations, the world economy will expand by 3.1 percent in 2011 and 3.5 percent in 2012 -- well below the figures needed to recover the jobs lost during the economic crisis.
Rob Vos, director of the development policy and analysis division of the UN Department of Economic and Social Affairs (DESA) , told reporters here that "we are not out of the woods yet and greater risks are looming."
Recent tensions over currency and trade, a weakening dollar, and exchange rate volatility have all contributed to an uncertain forecast for 2011 and 2012. "We foresee many downside risks in the next two years," said Vos.
Countries have already begun to enact defensive monetary measures to keep capital flowing into their economies. "There is still much more finger pointing," than concrete policies, said Vos.
As the major economies of Europe, Japan and the United States continue to pursue uncoordinated monetary policies, turbulence and uncertainty in global financial markets will persist.
"Failure to arrive at more coordinated policy responses aimed at a more benign global rebalancing will put the process of economic recovery and the stability of financial markets at further risk," notes the report.
Meanwhile, the WESP report highlights high unemployment worldwide as "the Achilles heel for the recovery."
The global economy will need to generate around 22 million new jobs in order to get to pre-crisis employment levels, said Vos.
In order to avoid further stagnation in the global economic recovery and a "double dip recession," world leaders will need to confront major policy challenges, said Vos.
The report outlines five major challenges facing policy makers, including: providing additional fiscal stimulus, redesigning policies geared towards job growth, finding greater synergy between fiscal and monetary stimulus, ensuring the availability of development finance, and coordinating policies among major economies.
Such challenges are monumental, particularly in an atmosphere where fears of additional stimulus run high as it would add to the deficits of major countries.
However, "what we are most worried about," said Vos, "is that without further stimulus the recovery will further slow down."