World Economic Situation And Prospects 2018 Boost in global economy offers opportunities to tackle deep rooted development issues According to the United Nation s Report on World Economic Situation and Prospects 2018, the world economy has strengthened as lingering fragilities related to the global financial crisis subside. In 2017, global economic growth reached 3 % the highest growth rate since 2011 and growth is expected to remain steady for the coming year. The improved global economic situation provides an opportunity for countries to focus policy towards longer-term issues such as low carbon economic growth, reducing inequalities, economic diversification and eliminating deep-rooted barriers that hinder development. Developing economies remain the main drivers of global growth. In 2017, East and South Asia accounted for nearly half of global growth, as both regions continue to expand at a rapid pace. The Chinese economy alone contributed about one-third of global growth during the year. Source: PHD Research Bureau, compiled from UN/DESA However, the recent improvements in growth remain unevenly distributed across countries and regions. Economic prospects for many commodity exporters remain particularly challenging. Negligible growth in per capita GDP is anticipated in several parts of Africa, Western Asia, and Latin America and the Caribbean. The impacted regions combined are home to 275 million people living in extreme poverty. Without sustained, economic growth, the chances of bringing that number to zero remain slim. To achieve the goals of eradicating poverty and creating decent jobs for all, it is essential to address the longer-term structural issues that hold back a faster progress towards sustainable development.
Source: PHD Research Bureau, compiled from UN/DESA. Note: a Estimated. b Forecast, based in part on Project LINK. c Fiscal year basis. d Includes goods and services. e Based on 2012 benchmark. Inclusive Growth The recent improvements in economic conditions, however, have been unevenly distributed across countries and regions. Negligible growth in per capita income is expected in several parts of Africa, Western Asia. 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 mediumterm growth prospects and tackle poverty through policies that address inequalities in income and opportunity. The report found that very few least developed countries (LDCs) are expected to reach the Sustainable Development Goal target for GDP growth of at least 7 % in the near term (SDG 8.1). Advances towards 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 the LDCs, policies must also focus on conflict prevention and removing barriers that continue to hinder more rapid progress. Environmental sustainability Preliminary estimates suggest that the level of global energy-related CO2 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. Policies that target international shipping and aviation emissions which do not fall under the purview of the Paris Agreement need to be strengthened, as emissions from these sectors continue to grow faster than those from road transport. Addressing financial challenges 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. The report suggests that a new financial framework for sustainable finance should be created in alignment with the 2030 Agenda and the Addis Ababa Action Agenda that would shift the focus from short term profit to long term value creation. Regulatory policies for the financial system, wellcoordinated with monetary, fiscal and foreign exchange policies, should support this framework, by promoting a stable global financial environment. Outlook for India Despite the slowdown observed in early 2017 and the lingering effects from the demonetization policy, the outlook for India remains largely positive, underpinned by robust private consumption and public investment as well as ongoing structural reforms. Hence, GDP growth is projected to accelerate from 6.7 % in 2017 to 7.2 % in 2018 and 7.4 % in 2019. Gross fixed capital formation as a share of GDP has declined from about 40 % in 2010 to less than 30 % in 2017, amid subdued credit growth, low capacity utilisation in some industrial sectors and balance sheet problems in the banking and corporate sectors. In this environment, vigorous public investment in infrastructure has been critical in propping up overall investment growth Looking ahead, there exists some degree of uncertainty over the monetary policy stance in India. Subdued inflation, coupled with a good monsoon season, offers scope for additional monetary easing. However, if inflation accelerates faster than anticipated, the loosening cycle could end abruptly. Please contact for any query related to this mail to Ms. Areesha, Research Associate at areesha@phdcci.in with a cc to Dr. S P Sharma, Chief Economist at spsharma@phdcci.in and Ms. Megha Kaul, Associate Economist, megha@phdcci.in, PHD Chamber of Commerce & Industry. Warm regards, Dr. S P Sharma Chief Economist ------------------------------------------------ PHD Chamber of Commerce and Industry PHD House, 4/2 Siri Institutional Area August Kranti Marg, New Delhi-110016
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