Global economic crisis far from over: UN trade body

Predicting a gloomy economic future, a top United Nations trade and development agency today said the governments still have a long way to go to tide over the financial crisis.

"The outlook is bleak," United Nations Conference on Trade and Development Director of Division on Globalisation and Development Strategies, Heiner Flassbeck told reporters at the UN headquarters in New York after releasing a report.

The world is still mired in a deep economic crisis and not much has been achieved in regulating the financial markets, Flassbeck said.

The real questions in that regard had not even been recognised, but thanks to the good reactions of some governments, the economy had stabilised somewhat and the decline had bottomed out. However, the perspective for growth was lacking, he noted.

Flassbeck said on the global level, private sector demand could only grow through consumption and investment, but rising unemployment and depressed wages depressed growth in consumption.

"Because capacity utilisation is 10 to 15 per cent below normal, there is no demand for new investments, and profits had in turn declined due to falling demand, he said urging governments to continue to stimulate the economy, stressing that talk of an "early exit strategy" was premature.

Flassbeck said the crisis has not only been caused by the housing crisis, but also by bubbles in the commodity markets, the stock markets and the currency markets. "All the bubbles had collapsed at the same time," he added.

In the last six months, the same bubbles were being inflated again in a "primitive attempt to anticipate a recovery that was not yet there," but they would deflate again when speculators realised that the global recovery was not as strong as anticipated.

Earlier releasing the report on trade and development for 2009, Miguel d’Escoto Brockmann, President of the General Assembly, said one year since the beginning of the crisis — and after some $18 trillion had been spent on bailout and stimulus packages — the rate of economic decline appeared to have diminished, but for many around the world the crisis is only beginning.

In addition to the adoption of the outcome document from the recent Conference on the World Financial and Economic Crisis and its Impact on Development, the General Assembly had established an open-ended working group to guide it in addressing the crisis, he said.       

Brockmann said the report contained analysis and up-to -date information indicating that the crisis reflected the predominance of the financial market over the real economy.

The report also pointed out that speculation had been allowed to play too large a role and that, rather than contradicting development goals, climate change mitigation offered opportunities for development.