- Global economic growth will rise slightly from 2.4% in 2023 to 2.5% in 2024, according to a new forecast from the United Nations Conference on Trade and Development (UNCTAD).
- However, UNCTAD is cautious about the U.S. economy, and a U.N. director tells CNBC that the forecast is “optimistic” given what he says is a “pretty weak” global economy.
- Growth prospects depend on the Eurozone and Europe is on the brink of recession.
Greg Fischer | Getty Images News | Getty Images
Prepare for “stagnant and divergent” global growth next year, a new United Nations forecast says.
According to the UN Trade and Development Report, global economic growth will increase slightly, from 2.4% in 2023 to 2.5% in 2024, but the global economy is in a precarious position, Richard Kozul-Wright, UNCTAD, Director the Department of Globalization and Department of Development Strategies, says CNBC.
“The global economy is quite weak and I think the forecast is an optimistic one,” he said.
The U.N. forecast team is not ready to declare a recession in the U.S., but sees significant economic headwinds that will lead to a slowdown in the U.S. economy next year, Kozul-Wright said.
“Despite all the thoughts of a soft landing and a Goldilocks recovery, there are many things to worry about,” he added, pointing to the UAW strike, the credit crunch, the resumption of student loan payments and the ongoing threat of a US dollar Government shutdown.
Despite these concerns, he noted that the U.S. economy remains the best performing among developing countries. “I know there are more and more voices using the ‘R word’ for the US next year, but we’re not calling it a recession yet. We are cautious,” he said.
Europe on the verge of recession
Wright tells CNBC that the economic situation in Europe is not getting enough attention and the UN forecast for the global economy depends on the euro zone.
“We need a recovery in growth in Europe,” said Kozul-Wright. “Investment in Europe is stagnating. The Eurozone has made no contribution to the global economy this year. It is on the verge of a recession.”
In his view, it is a mistake to focus on China’s economic health while paying attention to the eurozone’s economic health. “China will grow twelve times faster than the eurozone this year. I don’t think they will achieve five percent growth this year, but they are growing.”
The UN report states that stagnating or falling real wages across the European continent, coupled with austerity measures, are reasons for the slowdown in growth.
Almost a third of frontier economies face debt problems
The UN team says that despite recent wage increases around the world, wages have not kept pace with inflation and economic inequality remains a major challenge.
Developing countries are disproportionately affected, including by the effects of monetary tightening in advanced economies. The growing wealth gap threatens to further jeopardize developing countries’ economic recovery and aspirations to achieve the Sustainable Development Goals (SDGs), Kozul-Wright said.
According to the UN report, both external government debt and government-guaranteed (PPG) debt have tripled in low- and lower-middle-income “frontier economies” over the past decade. Added to this national debt problem are rising interest rates, weakening currencies and sluggish export growth. Almost a third of border economies are on the brink of a debt crisis.
UN calls for “Dodd-Frank”-like regulation of the food trade
Given the recent inflation in food prices around the world and shocks in key commodity markets such as: Such as grain prices following Russia’s suspension of the UN-brokered Black Sea Grains Initiative, Wright tells CNBC that UNCTAD is calling for a more transparent and regulated food trading system.
The report targets some of the world’s largest suppliers to the food industry and claims a pattern of “profiteering” reinforces the need for greater oversight and regulation of food companies under the global financial regulator.
“Cargill, Bungee, Archer Daniels Midland and Louis Dreyfus Companies are behaving more like hedge funds and should be treated as hedge funds,” Kozul-Wright said. “We need to look at the behavior of some of the big commodity traders. You make spectacular money in volatility. …have become almost as much financial institutions as commodity traders. … Dodd Frank was not fully implemented,” he said.