Economy

Global economic growth likely fall in 2019 on trade tensions, policy uncertainty, says UN

Updated : May 22, 2019 02:05 PM IST

The key reasons for the slip in growth are the persisting US-China trade tensions, the uncertainty in policy and the softening business confidence.

The UN made this claim in its report — World Economic Situation and Prospects (WESP) mid-2019.

The ongoing trade tensions between the US and China has led to the UN predicting that the growth of the world trade will drastically slip from 3.4 percent in the previous year to 2.7 percent this year.

Global economic growth likely fall in 2019 on trade tensions, policy uncertainty, says UN

US-China trade tensions, policy uncertainty and softening business confidence could bring down global economic growth, in terms of gross product, to 2.7 percent in 2019 and 2.9 percent in 2020 from 3.4 percent achieved in the year 2018, said a report by the United Nation.

The trade tensions between the US and China have been persisting since last year, causing volatility in the global markets and keeping the investors at bay, noted the UN in the report titles World Economic Situation and Prospects (WESP) mid-2019.

Negotiations between the United States and China have soured dramatically since early May when Chinese officials sought major changes to the text of a proposed deal that the Trump administration says had been largely agreed. The report predicted that the trade was is likely to lead to a spiral of additional tariffs and retaliation which can spillover on developing countries.

The other reasons that could trigger weak growth is a sudden deterioration in financial conditions and the accelerating effects of climate change.

The overall weak growth of the economy will cause hurdles in achieving the universal sustainable development goals of eliminating poverty, promoting prosperity, social well-being and protecting the environment.

The slowdown will also put investing in education, health, climate change adaptation and sustainable infrastructure at risk, the report said.

This is because countries may not have sufficient funds to invest or may hesitate to do so keeping in mind the low returns it will get given the situation of the world economy.

For India, the report predicted a GDP growth of 7.1 percent for the current fiscal.

"Strong domestic consumption and investment will continue to support growth, which is projected at 7.0 percent in 2019 and 7.1 percent in 2020," the report said.

The estimates for India, however, reflect a downward revision from the projections made in the World Economic Situation and Prospects 2019 report released in January this year. That report had estimated that India would grow at 7.6 percent in fiscal year 2019 and 7.4 percent in 2020.

It must be noted that despite the downward revisions, India remains the fastest growing major economy in the world, ahead of China.

(With inputs from agencies)

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