The situation of the global economy and the outlook for developing countries is brighter than a year ago, and China has played a vital role in the global recovery, the United Nations Conference on Trade and Development (UNCTAD) said in a its Trade and Development Report 2004 released Thursday.
While the US economy has provided a strong demand stimulus to the rest of the world, several developing economies in Asia, in particular China, have been able to increase not only their imports with strong spillover effects in economies in the Asia and Pacific region, but also their exports at double-digit rates, concludes the report, according to the World Bank press review Friday.
In 2003 and the beginning of 2004, China was a major engine of growth for most countries in East and South Asia, according to UNCTAD. UNCTAD forecasts that in 2004 rapid growth is likely to continue in East and South Asia, and particularly in the two largest economies, China and India.
Although exports to the United States continue to be an important component of total output growth in East and South Asia, this region has generated an intra-regional pattern of demand and specialization that should allow it to maintain a relatively stable growth path independent of cyclical and structural problems in the rest of the world, says the report.
Chinese news agency, Xinhua adds that expansion last year in the developing countries (4,5 percent) and transition economies (5,9 percent) outpaced growth in the developed world (2 percent). Income growth, however, continues to be very unequally distributed among the developing countries.
Since the second half of 2003, output growth has also picked up in Latin America after two years of falling per capita incomes. This is mainly due to a sharp recovery in Argentina (8,8 percent), where GDP had declined by almost 18 percent since 1998.
The UNCTAD report advised that an international body along the lines of the World Trade Organization should be created to regulate monetary and financial systems. The new body could help foster trade by keeping poorer countries from unfairly devaluing their currencies to increase exports. All countries should have a say in how the new body works.
The document said the proposed body would provide the necessary stability so that poor nations could securely “float” their currencies on exchange markets. Internationally competitive firms are beginning to appear in developing countries, but in many cases they are hampered by wildly fluctuating exchange rates. This could be done by establishing “a rules-based and truly multilateral monetary system, one in which all countries are involved in major decisions.”
Such a system would, among other things, require countries to justify major currency depreciations, it said. That would make for a more stable and predictable system that would lay the ground for governments to make other policy to boost the economy, such as tariff cuts.
In an editorial, Les Echos (France) writes that while the major international economic institutions are all voicing their opinions on the global economy, it is hard to make sense out of it all. On Wednesday, the IMF informed the public that all risks of major catastrophes for the international financial system had vanished, while on Thursday, the World Trade Organizations Annual Report insisted on the incoherence between the different economic policies adopted by countries, and the devastating effect of this incoherence.
The UNCTADs Trade and Development Report 2004 also points out this incoherence, and adds that the gains brought by international trade had been annihilated by bad practices in international finance. It underlines that the fate of global growth is dependent on the US and on its growing disequilibrium.
The editorial concludes that in our world, which is more open and faster than it has ever been, the ability of international institutions sophisticated systems to anticipate reality is at the same time necessary and chimerical.
Kilde: www.worldbank.org
