United Nations’ report warns of crippling financial crisis

Chennai: ‘Amid prolonged trade disputes and wide-ranging policy uncertainties, the world economy has seen a significant and broad-based deterioration over the past year,’ declared the World Economic Situation and Prospects 2020 report from UN (United Nations), released recently. ‘This threatens to impede efforts to reduce poverty, create decent jobs, broaden access to affordable and clean energy, and achieve many other Sustainable Development Goals.’

Stumbling economy
In its report about the financial situation of South Asian nations including Afghanistan, Bhutan, Bangladesh, India, Iran, Maldives, Nepal, Pakistan and Sri Lanka, the report said, ‘The economic slump in India, the deepening recession in Iran, and the looming twin fiscal and balance-of-payments crises in Pakistan have affected the outlook for many of the smaller economies in the region.’

India’s economic crisis has slammed neighbouring nations too. ‘The slowdown in India has dampened export growth across the region but has had a particularly serious impact on countries such as Afghanistan and Nepal, whose economies rely heavily on trade in raw and minimally processed goods with India,’ said the report. UN has predicted that ‘it will probably take several years for India’s growth rates to return to their previous levels, as the government will find it increasingly difficult to keep up the fiscal expansion.’

Hot planet
Just like Oxfam’s ‘Time to Care’ study which warned climate change as a major growth block, the UN report warned, ‘It will be the principal long-term risk for South Asian countries owing to their high dependence on fishing and agriculture, geographical structures, and insufficiently climate-resilient infrastructures.’

Natural disasters such as flooding and landslides have already proven to be extremely destructive in the region, and it is expected that they will only increase in frequency, it said. ‘Asian Development Bank projects that rising global temperatures will reduce GDP in South Asia by nearly 9 per cent by the end of century with Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka suffering the greatest losses,’ the report noted.

Struggling youth
UN urges government ‘to take steps to address barriers to labour force participation, particularly for women and youth. Improving access to decent employment will support both social development and economic productivity.’

The report said, ‘Labour productivity in South Asia is among the lowest in the world, and informal employment is widespread. Across the region, young people are among those struggling the most. In Afghanistan, Bangladesh, Pakistan and Sri Lanka, for example, more than 30 per cent of youth are not in education, employment or training; in India, this figure is over 40 per cent.’

Also, female labour force participation in South Asia has dwindled, it found. ‘It is currently at 26 per cent, compared with 52 per cent for Latin America and the Caribbean and 58 per cent for East Asia and the Pacific,’ the report said. ‘Demographic pressures and rapid urbanization will further compound these problems.’

Create balanced policy
To fight all such issues, UN strongly believes it is essential to create ‘a balanced policy’. The report said, ‘Amid concerns about overstretched monetary policies, a more balanced policy mix is called for. While central banks have responded swiftly to the deteriorating global outlook, fiscal policy has generally been underutilized as a counter cyclical tool.’

It added, ‘With interest rates at historic lows, governments that have ample fiscal space and pressing public investment needs should make use of the current favourable financing conditions. However, high debt levels and sizeable fiscal deficits limit the room for fiscal stimulus in many cases.’

Global cooperation
The report suggests, ‘Many development challenges are global in nature and cannot be adequately addressed by domestic structural policies alone. National policies need to be complemented by more effective international cooperation in order to achieve shared goals, particularly in the areas of climate change, international trade and finance.’

Fight global warming
‘The only way to break the connection between greenhouse gas emissions and economic activity is to change the energy mix,’ UN said. ‘Arresting global warming will require a strong political will and the full deployment of all available policy instruments.’ The report also pointed, ‘Many countries stand to gain from the energy transition but costs and benefits will not be equally shared.’

It said, the transition to a cleaner energy mix has the potential to bring not only environmental benefits but also economic benefits for many countries. ‘For example, heavy importers of fossil fuels stand to benefit from the development of local renewable energy sources, leading to improvements in energy supply security and external balances.’ it said. The costs and benefits will be very unevenly distributed within and between countries, discrepancies must be recognized and addressed through cooperative agreements to ensure a fair transition, the report added.

‘A wide gap remains between today’s world and a world in which the energy system is compatible with global goals for climate protection, universal access to energy and clean air. Strategies for the delivery of accessible, reliable and decarbonized energy are available but require political prioritization and public support’