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afrol News, 25 April - A sharp slowdown in the economy of United States after the positive trends of year 2000 is already being followed by all leading economies heading downwards. Africa, with growth rates that only rose modestly in 2000, is expected to experience severe setbacks in 2001. The key messages from The UN Trade and Development Report for 2001, released yesterday, are alarming for world and African economies. The report, which is produced annually by the UN Conference on Trade and Development (UNCTAD), says that the downturn in the US probably will be followed by a hard landing in global economy in 2001. Consequently, instability in the world economy could be more pronounced than under normal conditions, and cooperation among all major players in the world economy becomes more necessary, the report concludes. Year 2000 in general was a good year. Also the developing regions picked up in 2000, posting an overall growth rate of 5.5%. "Only Africa failed to register a significant increase in per capita income; its modest acceleration in growth to 3.5% is still insufficient to tackle rising poverty and declining health," according to UNCTAD. According to the report, there is a certain degree of asymmetry in the impact of fluctuations in global economic activity as regards Africa. "Because of supply-side rigidities, African [least developed countries] that rely on exports of only one or two primary commodities cannot take full advantage of global expansion by increasing their export volumes, while they often bear the full brunt of commodity price declines." Prices of many of the commodities exported from Africa were falling in the 1990s. The rise in oil prices benefited some countries in 1999, and again in 2000, but for others, particularly the many that depend on oil imports, the consequence was a further widening of the resource gap. - Thus, despite the strong growth in the world economy in 2000, Africa's growth rate rose only modestly, to 3.5 per cent, which is below the rate reached before the Asian financial crisis and well below what is needed to tackle the problems of rising poverty and declining health, concludes the report. Even before the slowdown in the US, growth forecasts for Africa were being revised downwards "because of the continued sluggishness of some of the larger economies, severe weather conditions and disruptions caused by civil and political unrest." - In these circumstances, any global shock could be particularly damaging for African countries, UNCTAD concludes the prospects for 2001. - Not surprisingly, aid and debt relief remain high on their political agendas, the report says. "The region should benefit from bilateral debt reduction accorded by some industrialized countries to the poorest economies, as well as from recent European and US initiatives to open up their markets to the poorest economies in Africa." However, with progress on the debt relief initiative by the World Bank and IMF still much too slow, and a growing acknowledgement that the financial benefits are much smaller than expected, the report concludes "there is an urgent need for a bolder approach to multilateral debt relief." - With policy makers everywhere concerned about the effect of the economic slowdown in the United States, the report's call for greater coordination and cooperation on economic issues deserves careful consideration, UN Secretary-General Kofi Annan commented the report. Rubens Ricupero, Secretary-General of UNCTAD, called for "bolder policies to stem global economic downturn" presenting his agency's report. "The major economies would have to be "firing on all engines and at the same time" for the world economy to regain its momentum this year. Stressing that longer-term world prospects cannot hinge on events in a single country, UNCTAD's economists say that so far, policy makers in the US have shown their willingness to respond to worrying economic signals, but Europe has remained reluctant to follow suit, and Japan's "limited room for expansionary policy" holds out at best a hope for gradual improvement. The hope now, UNCTAD says, is that Europe, where growth in 2000 broke the 3 per cent barrier for the first time in a decade, will "grasp the baton" from the US. Europe has limited trade ties with the US.
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