UNCTAD report warns of gloomy outlook for world economy

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GENEVA, Sept 6 (Xinhua) Instability in international financial, currency and commodity prices are contributing to a gloomy outlook for the world economy, the United Nations Conference on Trade and Development (UNCTAD) warned in a report Thursday. brThe ongoing global financial crisis and the possibility of tighter monetary policies in some major developed countries presage major difficulties for the world economy for the remainder of 2008 and in 2009, warned the annual trade and development report. brThe report expects world economy to grow by around 3 per cent in 2008, almost 1 percentage point less than in 2007. brIn the developed countries GDP growth is likely to be around 1.5 per cent. The short-term outlook is better for the developing world, where growth could exceed 6 per cent, as a result of the relatively stable dynamics of domestic demand in a number of large developing economies. brBut fallout from the recession in the developed world and overly restrictive monetary policies in countries with high headline inflation could well lead to a further deceleration of growth in developing countries, it warned. brAccording to the report, central banks of major developed countries should not further raise interest rates, as the risk of galloping inflation as a result of higher primary commodity prices has been considerably overestimated. brIn the current fragile condition of the global economy, measures to tighten monetary policy would exacerbate the global slowdown, said Supachai Panitchpakdi, UNCTAD's secretary general. brThe report also urged governments to take new measures aimed at achieving greater commodity price stability. brIt also recommends quick-response instruments to mitigate the impact of sharp commodity price fluctuations. brStricter regulatory measures that help contain speculation on commodity markets could be one important step, since commodity market speculation typically exacerbates price trends originating from changes in fundamentals, it said. brThe report also advised developing countries to promote diversification and industrial development in order to reduce vulnerability to commodity price shocks. brSuch a transition requires higher investment in new productive capacities-the ability to manufacture more varied and sophisticated goods-and in the infrastructure, it said.