The United Nations says the global economy will continue to grow this year as it did in 2005, led by the major economies of Asia. However, the organization says employment rates have not matched the economic expansion, which is threatened on a number of fronts.
The United Nations report predicts the economies of East and South Asia will expand by 6.5 percent this year, supporting the continuation of a two-year worldwide economic recovery. However, the projections represent a decline from overall growth rates in 2004, and reflect what the report calls a maturing of the global economic recovery.
One of the authors of the annual report, U.N. economist Shamika Sirimanne, told reporters in Bangkok Thursday that Asian economies are growing at twice the worldwide rate.
"Why is the world economic growing at only three-point-three percent? One of the things is the U.S. economy is slowing down, and there is a stagnation in Europe," said Sirimanne. "But nonetheless, developing countries are doing extremely well."
The report said Asia's strong showing is due in large part to projected growth rates of nine percent in China and eight percent in India.
The document predicts growth in China will decline by about one percentage point because of cooling investment in the steel and cement industries, consumer electronics and real estate. However, the economies of Malaysia, Thailand, Singapore and Taiwan are likely to be boosted by an improving economy in Japan, and by rising global demand for electronics, one of their major exports.
The economies of India, Pakistan and Bangladesh are likely to be boosted by continued demand for textiles and growing investment in infrastructure, health and education. The report says that although the October earthquake in northern Pakistan and India caused devastating losses to human life and infrastructure, it lowered economic output by only one-half percent, because the affected areas were not major agricultural or industrial production zones.
The report says the least-developed countries, especially in Africa, are expected to produce overall growth rates in excess of six percent this year, due to rising commodity prices and improved political stability. But it notes that strong growth is occurring in only one-half of these countries, while it stagnates in the others.
U.N. economist Sirimanne says a major concern is employment figures, which have not returned to the levels of before the worldwide downturn five years ago.
"Even though the [economic] growth has been okay in the last few years, there's a concern that this growth is not generating enough employment," added Sirimanne. "This is a phenomenon across the developed world, and also [the] developing world and in Asia too."
The report warns that prospects for growth are threatened by rising oil prices, the possibility of an oil price shock due to war or natural disaster, and the possibility of a bird flu pandemic.
It says inflationary pressures due to oil prices in Asia have been softened by a rise in interest rates and the value of the U.S. dollar, which have tightened money supply. But it warns that inflation may increase as price subsidies by Asian governments are lifted.
It also warns that the ballooning U.S. trade deficit, which reached a record $800 billion last year, is being financed in large part by foreign central banks, which are buying U.S. bonds and other debt instruments. It says a sudden drop in the value of the U.S. dollar or a switch by central banks to other investments could spark a sell-off, sending the world economy into a downward spiral.
The document says real estate speculation in the United States has created a price bubble which, should it burst, could affect growth. It says rising real estate prices in many Asian cities are also a cause for concern.