7 February 2005

Recovery in World Economic Growth in 2004 Tempered by Continuing Global Trade Imbalances, Oil Price Uncertainties, ECOSOC Told

In Organizational Meeting, Council Approves Agenda for 2005 Session; Considers NGO Status, Reports on Burundi, Guinea-Bissau, among Other Matters

NEW YORK, 4 February (UN Headquarters) -- There had been a recovery in world economic growth last year, but significant differences remained between developed and developing countries, and global imbalances were increasing, Under-Secretary-General for Economic and Social Affairs, José Antonio Ocampo, told the Economic and Social Council (ECOSOC) today.

As the Council continued its organizational session this afternoon, he said that a positive outlook was tempered by risks.  Improved growth in 2004 had been almost universal and unusually widespread across developing regions.  A universal, but limited slowdown was anticipated for 2005, and an unbalanced growth across the developed countries posed a certain risk.  Among other risks ahead, he mentioned oil prices -- still moderate, but subject to a “fear premium”.  There were also concerns about uncertainties regarding possible disruptions in supplies.  A long-term gradual adjustment of both “deficit” and “surplus” countries was required to correct global imbalances.

The report, “World Economic Situation and Prospects”, is issued by the United Nations Department of Economic and Social Affairs every January, together with the United Nations Conference on Trade and Development (UNCTAD) and the five regional economic commissions of the United Nations.  In an otherwise upbeat assessment of the world economy, this year’s survey cautions that, contrary to previous expectations, global imbalances, and the United States trade deficits in particular, would not be corrected by the rapidly falling United States dollar alone and would require broad international cooperation to rectify.

Participating in the discussion of the report were representatives of Jamaica (on behalf of the “Group of 77” developing countries and China), Benin, the United States and Pakistan.

Dumisani S. Kumalo (South Africa), Chairman of the Ad Hoc Advisory Group on African Countries Emerging from Conflict, introduced the report of the Ad Hoc Advisory Group on Guinea-Bissau and reported to the Council on the work of the Ad Hoc Group on Burundi.  Statements on that agenda item were made by representatives of Luxembourg (on behalf of the European Union), Burundi, Nigeria (on behalf of the African Group) and Guinea Bissau.

During the organizational part of the meeting, the Council decided to change the dates of its substantive session from 4 to 29 July to 29 June through 27 July.  It also took note of the list of questions for inclusion in the programme of work for 2006 and adopted its provisional agenda for the 2005 substantive session (document E/2005/I), as orally corrected, with the proviso that note would be taken of the Group of 77 proposal to move item 8 of the agenda (implementation of General Assembly resolutions 50/227, 52/12 B and 57/270 B) to the coordination segment, with the understanding that the Council might wish to continue its consideration of the issue at a later stage.

While consultations are also going to continue on the working arrangements for the session and some other organizational questions before the Council, today it was decided that the theme of the regional cooperation segment of the substantive session would be “Achievement of the internationally agreed development goals, including those contained in the Millennium Declaration:  a regional perspective”.  The work of the operational activities segment should be devoted to the progress on and implementation of General Assembly resolution 59/250 on the triennial comprehensive policy review of operational activities for development of the United Nations system.

Turning to the recommendations of the Committee on Non-Governmental Organizations, the Council decided to grant consultative status to 87 non-governmental organizations recommended by that body; and requested Asociacion para la Paz Continental -- an organization suspended in 2000 -- to submit an updated application to be considered at the Committee’s future sessions.  The ECOSOC also requested that the two days not used by the NGO Committee at its regular session be added to its two-week resumed session next May, on the understanding that conference services for those days would be provided on an as-available basis.  In that connection, Cuba’s representative expressed hope that, in view of the importance of the work of the NGO Committee, the matter of the provision of services would be resolved before the resumed session of that body.

Also this afternoon, the Council approved the Secretary-General’s nomination of Iskra Beleva of Bulgaria to the Committee for Development Policy for a term of office beginning today and expiring on 31 December 2006.  Sweden was elected, by acclamation, to the Governing Council of the United Nations Human Settlements Programme (UN-HABITAT) for a term expiring on 31 December 2008.  The Council decided to postpone election of remaining candidates from the Asian States and the Latin American and Caribbean States.

The ECOSOC will hold its next meeting at a date to be announced next week.

Briefing on World Economic Situation

Briefing the Council, JOSE ANTONIO OCAMPO, Under-Secretary-General for Economic and Social Affairs, said that there had been a significant recovery in world economic growth last year, but significant differences remained between developed and developing countries, and global imbalances were increasing.  Growth in world trade volume had resumed last year, and oil prices had increased in 2004, but remained well below their all-time highs.  Most non-oil commodity prices had also increased, but remained below the level of the 1970s.  The financial markets had not been a crucial factor in the world economic growth last year, but they remained calm and, thus, had not played a negative role in that regard.

The global forecast had called for the world economy to expand 3.25 per cent this year, a “modest deceleration” from 4 per cent growth in 2004, he continued.  While the United States and China were now the principle growth engines for the global economy, growth in developing countries was the fastest in over two decades, and the output in the remaining economies in transition continued to increase more rapidly than in other major country groups.

An important phenomenon had been the steady rate of economic growth in the wider developing world, he said.  Growth on the African continent in 2004 had been fuelled by higher agricultural output, improved political stability and incoming donor support, as well as stronger commodity markets, and those same factors were expected to produce a similar outcome.  At the same time, although there had been steady growth in sub-Saharan Africa, that might still not be enough for the region to reach the Millennium Development Goals.

Regarding the future, he said that a positive outlook was tempered by risks.  Improved growth in 2004 had been almost universal and unusually widespread across developing regions.  A universal, but limited slowdown was anticipated for 2005, and an unbalanced growth across the developed countries posed a certain risk.  Among other risks ahead, he mentioned oil prices, which were still moderate, but continued to be subject to a “fear premium”.  More risks could be associated with the uncertainties regarding possible disruptions in supplies.

The United States was experiencing “twin” trade and fiscal deficits, he said, and the markets were adjusting with a decline in the dollar’s value.  The country’s economy was expected to grow 3 per cent -- compared with 4.2 per cent last year -- due to the huge projected budget deficit and recent interest rate increases.  Several other large countries were among those that had fiscal deficits widely regarded as “excessive”, and efforts to reduce them would have a moderating effect on growth.

While some correction of the United States fiscal deficit and an improvement in its private savings rate seemed necessary to correct the global imbalances, the depreciation of the dollar was not enough.  A long-term gradual adjustment of both deficit and surplus countries was required to correct global imbalances, he said.  Greater international economic coordination would be needed to avoid “a hard landing” of the world economy.


STAFFORD O. NEIL (Jamaica) said the exercise was very important for the Council.  He was sorry that that it had been treated as a background document.

He hoped that, under the reformed ECOSOC acting as an important player in the management of the global economy, the report would be dealt with in a more substantive way.  The report contained some disturbing elements.  Although there had been growth in all regions, there were disparities with the level of growth, even in the different regions.  He asked if there were similar trends regarding employment.  Although still modest, he was also pleased by increased commodity prices.  Commodity prices must be seen in a recovery phase.  Would a slowdown in China’s economy mean a slowdown in demand for commodities? he asked.

FERNANDE AFIAVI HOUNGBEDJI (Benin), noting that the report did not contain an analysis for the least developed countries, asked what the objectives of the report were, particularly for those countries.  Why wasn’t that group of countries presented as a study in the report? she asked.

LUCY TAMLYN (United States) said the global economy was the strongest it had been in over 30 years.  Growth was up, there were no major economies in recession, and most economies in the world were growing at a healthy pace. Improved economic policies and economic relations between countries played a big part in the positive performance trends.  In that regard, the United States was puzzled by a developed versus developing country dynamic.

There was mutual recognition that trade was the single largest contributor to economic development, and trade liberalization presented the greatest opportunity for developing countries to integrate more fully into the global economy, she said.  Given that trade between developing countries accounted for 40 per cent of developing countries’ total trade and 70 per cent of their trade-related duties, the report would have been strengthened by a discussion of barriers to trade between developing countries that posed significant obstacles to trade and competitiveness.  International financial institutions had made an important contribution to the strong global economic situation.

By putting the focus on economic growth, the report correctly underscored the fact that economic growth as the most important contributor to poverty reduction, she said.  Because of the key role of the domestic private sector, the United States would welcome a greater emphasis in future reports on efforts to improve the climate for private-sector-led growth.  It would be particularly useful for such reports to focus on domestic reforms and good governance as keys to sustainable growth and development.

Although the report as a whole contained many useful contributions to understanding the current world economy, she expressed concern about the prominent use of “negative net transfers” from developing to developed countries as a negative indicator of development progress.  A net transfer number could reflect favourable or unfavourable developments in a country depending on its individual circumstances.  The report treated the concept of “negative net transfer” as if it were a meaningful measure of economic progress, a point she found misleading.  Focusing on the issue distracted attention from more meaningful economic analysis and implicitly criticized some of the very pro-growth policies that the United Nations had worked to promote.

She also noted that, although the report contained a section on so-called “innovative sources” of financing for development, the discussion did not adequately reflect the fact that serious disagreement over the merits of such schemes remained.  The United States disagreed with the Secretariat’s taking a position on the issues of IFI (international financial institutions) voice, vote and representation in the report.  It was as inappropriate for the United Nations to attempt to insert itself into the issue as it would be for the Bretton Woods institutions to issue recommendations on the Council’s reform.  Despite those shortcomings, the report made many useful contributions to the understanding of the global economic situation and its contribution to the achievement of internationally agreed development goals, including those contained in the Millennium Declaration.

Economic and Social Council President MUNIR AKRAM (Pakistan) noted that all countries had grown, including the developing countries.  For many of the low-income and poorest countries, the base from which they had started was very low.  Although there was growth, the impact on the eradication of poverty had not yet been substantial.  Noting that a rebalancing of trade surpluses and deficits was needed in order to reduce risk factors, what would be the impact of a conscious effort to instigate growth in the poorest countries?  Would that not contribute to rebalancing the world imbalances?

Response by Under-Secretary-General

Responding to questions, Mr. OCAMPO said that one of the universal weaknesses in the world economy, according to the report, continued to be the slow growth of employment and persistence of high rates of unemployment and underemployment in most developing countries.  While “jobless growth” in the developing world had not appreciably worsened, it was, nevertheless, a troubling structural problem for many small countries.  Unless improved economic growth was reflected in increased employment, it would prove difficult to reduce poverty.

There had been a large diversification as far as commodities and services were concerned, but commodity prices and markets were still important for developing countries.  The report considered the economic situation of various regions, all of which showed significant growth rates.  While that was the case, however, the poorest countries needed to grow faster than others to meet the Millennium Development Goals, including the objective of halving poverty by 2015.

The emphasis made in the report was that growth had been very uneven among developed countries, he continued.  That was a notable change from the previous situation.  The fact that the United States was far ahead of other developed countries was a reason for that country’s large trade deficit.  The point made in the report was not that the United States needed to slow down -- it was important for other countries to speed up.  The United States should continue to be the locomotive of the world economy.

To another question, he added that the report contained an analysis of trade and finance, covering all the themes of discussion in the World Trade Organization (WTO) and other international forums.  He also emphasized that the report did not promote any particular position, but directly quoted the Monterrey consensus, which specifically stated that it was necessary to broaden the participation of developing countries and countries with economies in transition in decision-making on economic issues.

Reports of Ad Hoc Advisory Groups

Reporting on the work of the Ad Hoc Advisory Group on Burundi, the Chairman of the Ad Hoc Advisory Group on African Countries Emerging from Conflict, DUMISANI S. KUMALO (South Africa), updated the Council on that Group’s activities, noting that it had pursued its work, inspired by the Council’s positive assessment, while taking into account proposals to improve its efficiency.  Important development’s included the decision of the African Development Bank to clear some 35 per cent of Burundi’s arrears and the launching of the Demobilization, Reinsertion and Reintegration programme to support up to 55,000 Burundian combatants in five years.  Such developments should not hide the fact that the humanitarian, economic and social needs were enormous in Burundi.  The country was emerging from 10 years of war, which had caused the displacement of a fifth of the population and gravely damaged physical and economic infrastructures.

In that challenging environment, administrative infrastructures had continued to function, he said.  There had been some progress in the peace process, and a constitutional referendum was now scheduled for 28 February, which would be followed by a series of elections.  In spite of progress, international support was far below the commitments made at the Forum of development partners held in Brussels one year ago.  An example of the current fragility of the socio-economic situation was the recent food insecurity in the country’s northern provinces.  At a crossroad, the efforts of the country’s Government and people had to be matched by strong international support, in the framework of a true partnership.  The Group believed that it should continue its activities during the transition process, including a second mission to the country.

JEAN-MARC HOSCHEIT (Luxembourg), speaking on behalf of the European Union and associated States, noted that positive developments had taken place since the Council’s last meeting to assess the situation of Burundi.  The international community had made great efforts in the field of debt relief for that country.  The Union was among the most committed actors in that regard.  International support, however, was far below the commitments made at the Forum of Development Partners held in Brussels one year ago.  The Union welcomed the launching of the Demobilization, Reinsertion and Reintegration Programme in December 2004.  In that context, he commended the exemplary cooperation between the United Nations system, the international community, the World Bank and the Burundian authorities.

Despite outstanding issues and delays, an end to the Burundian transition period was in sight, he said.  All parties, including the army, had accepted the need to finalize the transition process.  Preparations for elections were being made, and disarmament, demobilization and reintegration, as well as security sector reform were progressing.  The United Nations Operation in Burundi (ONUB) was proactively carrying out its mandate as an over-horizon force, which was positively influencing the process. Nevertheless, hurdles still needed to be overcome. There had been considerable developments in the United Nations on the issue of post-conflict peace-building since the Group’s establishment.  In that regard, the recommendation to create a peace-building commission resonated strongly with the Union’s determination to address the institutional gap identified on many occasions between the end of armed violence and the return to development activities in a secure environment.

MARC NTETURUYE (Burundi) welcomed the interest shown by the Council on the situation in Burundi.  His gratitude also went to the Chairman of the Advisory Group for his commitment to country’s reconstruction as it tried to re-establish itself after ten years of war.  Burundi had made constant progress in peace-building and was preparing to hold elections next April.  Its partners had been invited to ensure that the post-transition period was a period of stability.  Burundi would need decisive aid in years to come.  The Group, therefore, had further work to ensure that all remained engaged in the process, thereby ensuring a revival of the country’s socio-economic situation.

BULUS PAUL ZOM LOLO (Nigeria), speaking on behalf of the African Group, emphasized that there had been tremendous progress in Burundi, and the parties were committed to restoring peace and stability in the country.  The African Group was concerned, however, that the donors tended to wait to see the evolution of the political process.  The focus should be on placing development at the centre of attention and improving the standard of life of the population.  He encouraged the donors to provide assistance in that regard.

Reporting on the work of the Ad Hoc Advisory Group on Guinea-Bissau, Mr. KUMALO (South Africa) noted that the country, emerging from years of conflict, still faced tremendous challenges, including difficult structural social, economic and security issues.  If that were not enough, locusts were creating havoc all the way through the Sahel to the middle of the continent.  On 6 October, Guinea-Bissau had experienced a tragic uprising by soldiers who had rebelled at not being paid for their service in the United Nations Peacekeeping Mission in Liberia.  The uprising had exposed the fragility of the country’s democratic transition and had presented a serious setback to the Government’s efforts to promote an environment for international assistance and private investment.

While the unfortunate incident had not been unexpected, some of the root causes had been reflected in the Group’s last report, he said.  They included security risks associated with the lack of payment of salaries, particularly to the military, the awful conditions under which soldiers lived in the barracks and other deplorable conditions of service.  The United Nations Development Programme (UNDP) had created the Emergency Economic Management Fund (EEMF) to address socio-economic problems, which had been critical to the transition in Guinea-Bissau so far.  The Secretary-General had since recommended a special fund to support efforts related to the planning and implementation of military reform in Guinea-Bissau.

The Group was pleased by the positive approach that the Bretton Woods institutions continued to render to Guinea-Bissau, he said.  The Executive Board of the International Monetary Fund had agreed in principle to support renewed access by Guinea-Bissau to emergency post-conflict assistance, on an exceptional basis, as a demonstration of support for United Nations-led efforts to promote stability in the country.  Despite the setback in October 2004, the Group believed that the Government of Guinea-Bissau had created a basis for progress that remained in place.  The country, as a whole, was committed to not returning to conflict.  The Government was committed to good economic management and reform.

Regarding the most recent challenge to the country’s economy, he noted that swarms of locusts were attacking cashew nut trees.  Cashew’s were Guinea-Bissau’s main export and a vital cash income for two thirds of the country’s peasant farmers.  With trees in flower, locust damage could sharply reduce this year’s production, thereby plunging the fragile economy into further crisis.  Locusts were also attacking other subsistence crops such as cassava, undermining the country’s food security.  Guinea-Bissau was now in a period that was leading to the presidential elections in May 2005 and a full donor conference later in the year.  For that reason, it was essential that the Ad Hoc Group continue to monitor and support political and socio-economic developments in the country.

ALFREDO LOPES CABRAL (Guinea-Bissau) thanked the Chairman for his work as head of the Ad Hoc Group on Guinea-Bissau.  He had fully outlined the situation in the country, and the overwhelming role the Group continued to play.  The Group should continue its efforts in the country.

Mr. LOLO (Nigeria), speaking on behalf of the African Group, said the Group had made positive contribution to the situation in the country.  Because of the Group’s involvement, things had emerged positively.  He asked partners to look favourably on the recommendation to extend the Group’s mandate as it was a necessary measure at the current critical juncture.

Mr. NEIL (Jamaica), speaking on behalf of the “Group of 77” developing countries, stressed the importance of support to the mobilization of resources to assist both countries.  He would speak at length on the Group’s activities when he introduced related draft resolutions, which were currently under negotiation.

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