Mild growth expected for 2010's world economy, new UN report says

08:04, January 21, 2010      

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The world economy is forecast toward a mild growth of 2.4 percent for 2010, said a new UN report released here on Wednesday.

Although it is 7 percent below where it might have been pre- crisis, the world economy is rebounding with developing Asia leading the way, the UN World Economic Situation and Prospects 2010 Report said.

In particular, the revival has been built around three factors which the report credited to as the "concerted policy actions" undertaken by major economies, a change in the global inventory cycle and the "international repercussion effects" stemming from the previous variables.

The report described the beginning of the global inventory cycle as a period of "panic-driven shedding" of inventories, which went hand in hand with cutbacks in industrial production.

Subsequent steadiness in the financial markets allowed for business and consumer confidence, which then led companies to resume their production and restock inventories, the report said.

The report noted that the main assumptions for the baseline forecast are namely the monetary policy, fiscal policy, exchange- rate movements and oil and other commodity prices.

In the forecast period, the report said that the central banks in major economies will rely on adjusting unconventional measures which are already in place in order to keep liquidity in check with their economies.

For the second half of 2010, it will be assumed that there will be a gradual withdrawal of some of those measures, the report said.

Also noted in the report was the fiscal policy where in the current climate, it will be seen that "automatic stabilizers" will continue to be used uninhibited except in cases where countries have experienced extreme financial downturns.

Other main assumptions for the baseline forecast include that the U.S. dollar will stay in the trading range at 1.44 U.S. dollars against the euro and close to 90 Japanese yen per dollar through 2010, in addition to a rise in brent oil prices.

The forecast of the world economy in the report was based on the UN Global Forecasting Framework (GFF) in collaboration with Project LINK, which is a network of institutions supported by the Department of Economic and Social Affairs of the UN.

Source: Xinhua
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