World economy to grow 3 percent in 2018 and 2019: UN report

File photo of the United Nations. [Photo: VCG]

The world economy is expected to remain stable in 2018 and 2019 after an impressive growth rate of 3 percent in 2017, said a UN world economic prospects report launched on Monday at UN Headquarters in New York.

The growth in 2017 is the strongest performance of the world economy since 2011. Global growth is expected to remain steady at 3 percent in 2018 and 2019, said the UN World Economic Situation and Prospects 2018 report.

The improvement is widespread, with roughly two-thirds of countries worldwide experiencing stronger growth in 2017 than in the previous year.

The recent pickup in global growth stems predominantly from firmer growth in several developed economies, although East and South Asia remain the world most dynamic regions. In 2017, East and South Asia accounted for nearly half of global growth, with China alone contributing about one-third, according to the report.

The end of recession in Argentina, Brazil, Nigeria and Russia also contributed to global economic upturn between 2016 and 2017, which has been supported by a rebound in world trade and an improvement in investment conditions.

The challenge is to channel this into a sustained acceleration in productive investment to support medium-term prospects, said the report.

The improved global economic situation provides an opportunity for countries to focus policy toward longer-term issues such as addressing climate change, tackling existing inequalities and removing institutional obstacles to development, it said.

"The World Economic Situation and Prospects 2018 demonstrates that current macroeconomic conditions offer policy-makers greater scope to address some of the deep-rooted issues that continue to hamper progress toward the (2030) Sustainable Development Goals," said UN Secretary-General Antonio Guterres in the Foreword of the report.

Launching the report, UN Undersecretary-General for Economic and Social Affairs Liu Zhenmin noted: "While the upturn in global growth is a welcome sign of a healthier economy, it is important to remember that this may come at an environmental cost. This calls for stronger efforts to delink economic growth and environmental degradation."

Despite the improved short-term outlook, the global economy continues to face risks, including changes in trade policy, a sudden deterioration in global financial conditions and rising geopolitical tensions, said the report.

The world economy also faces longer-term challenges. The report highlighted four areas where the improved macroeconomic situation opens the way for policy to address these challenges: increasing economic diversification, reducing inequality, supporting long-term investment and tackling institutional deficiencies.

The report said that reorienting policy to address these challenges can generate stronger investment and productivity, higher job creation and more sustainable medium-term economic growth.

It also noted that the recent improvements in economic conditions have been unevenly distributed across countries and regions. Negligible growth in per capita income is expected in several parts of Africa, Western Asia and Latin America and the Caribbean in 2017-2019.

The impacted regions combined are home to 275 million people living in extreme poverty, underscoring the urgent need to foster an environment that will both accelerate medium-term growth prospects and tackle poverty through policies that address inequalities in income and opportunity, said the report.

It found that very few least developed countries are expected to reach the 2030 Sustainable Development Goal target for GDP growth of at least 7 percent in the near term.

Advances toward sustainable development in this group of countries continue to be hindered by institutional deficiencies, inadequate basic infrastructure, high levels of exposure to natural disasters, as well as challenges to security and political instability.

In addition to mobilizing the financial resources to meet the investment needs in these countries, policies must also focus on conflict prevention and removing barriers that continue to hinder more rapid progress, said the report.

Preliminary estimates suggest that the level of global energy-related carbon dioxide emissions increased in 2017 after remaining flat for three consecutive years. The frequency of weather-related shocks continues to increase, also highlighting the urgent need to build resilience against climate change and prioritize environmental protection, it said.

Many developing economies and economies in transition remain vulnerable to spikes in risk aversion, sudden capital withdrawal and an abrupt tightening of global liquidity conditions, while rising debt poses global financial challenges, said the report.

The World Economic Situation and Prospects report is produced annually by the UN Department of Economic and Social Affairs in collaboration with the UN Conference on Trade and Development, the five UN regional commissions and the World Tourism Organisation.