KUALA LUMPUR: The world economy is heading into troubled waters, with recession in 2020 now a clear and present danger, according to the United Nations Conference on Trade and Development (UNCTAD).
In its Trade and Development Report 2019 released today, UNCTAD said warning lights were flashing around trade tensions, currency movements, corporate debt, a no-deal Brexit, and inverted yield curves.
“There was a little sign that policymakers are prepared for the storm ahead,” it said.
The report called for focus on boosting jobs, wages and public investment to replace policymakers’ obsession with stock prices, quarterly earnings and investor confidence.
Even ignoring the worst downside risks, the report projects global growth to fall to 2.3 per cent in 2019 compared with 3.0 per cent in 2018.
Several big emerging economies are already in recession, while some advance economies, including Germany and the United Kingdom, are dangerously close, said the report.
Trade growth is set to slow sharply this year to 2.0 per cent from 2.8 per cent, following weakening global demand and compounded by the unilateral tariffs imposed by the United States administration.
The bigger concern, according to the report, is that 10 years on from the 2009 crisis, the global economy remains excessively financialised and fragile.
Meanwhile, the report also noted that debt has become a dominant driver of global growth but has failed to deliver a strong surge in productive investment, instead fuelling financial speculation.
“In this environment, developing countries have seen debt transformed from a long-term financing instrument to help unleash their future growth potential into a potentially high-risk financial asset, subject to the vagaries of international financial markets and proliferating short-term creditor interests,” it added.