Global economy in need of sustainable growth: UNCTAD

GENEVA, Sept. 11 (Xinhua): With insufficient demand and continuing financial instability being major problems, global economy is still in want of a sustainable growth path six years after the outbreak of global financial crisis, said a UN report Wednesday.
According to the United Nations Conference on Trade and Development (UNCTAD) in its latest report released Wednesday, entitled as Trade and Development Report 2014, the UN organ's flagship report, tracked trends of global economy and observed a modest pickup of economic growth in 2014.
Statistics in the report showed that the global economy was expected to grow by 2.5 per cent to 3.0 per cent in 2014, slightly higher than the 2.3 per cent in the past two years but still below its pre-crisis height.
The developed countries would raise their growth rate from 1.3 per cent in 2013 to 1.8 per cent this year, and the developing countries would grow at between 4.5 per cent to 5.0 per cent, meanwhile the growth in transition economies, mainly referring to South-East Europe and the Commonwealth of Independent States, is estimated to decelerate to around 1 per cent.
UNCTAD noted that to boost the low economic growth requires strengthening the demand via real wage growth and more equal income distribution rather than new financial bubbles, but the continuing dominance of finance over real economy and the persistent decline in the wage share reflects the failure to address the causes of the crisis and the current sluggish recovery.
The report also attached emphasis to the international trade, highlighting that the around 2.0 per cent growth rate of world merchandise trade in the past two years and early 2014 was weaker than that of global economy.
It attributed the dull performance to weak global demand, and stressed that global expansion of trade must be achieved through a robust economic recovery braced by domestic demands, warning that efforts to spur exports through wage reduction and internal devaluation would backfire.
As for the opinion that global economy has managed to avert systematic risks and established a low inflation, and slow but stable and sustainable growth path, UNCTAD didn't see eye to eye but spotlighted the current challenges including weak employment growth, stagnant wages and rising levels of household debts alongside with surging asset prices, and growing profit shares.
Insisting that some drivers of present recovery may not be adequate for sustainable growth, UNCTAD pointed out that the developed countries launched policies which combined fiscal austerity, wage restraint and monetary expansion to cope with the crisis, but such measures suffocated domestic demand while encouraged liquidity to flow into financial sector instead of productive investments.
This resulted in a significant increase in asset prices in spite of feeble economic growth and also led to large capital outflows, much of which directed into emerging markets, said the report.
It warned that such policies only indirectly supported a demand recovery in those countries where asset appreciation generated a sufficiently strong wealth effect, and encouraged renewed consumer borrowing, and such a situation shared certain obvious parallels with the conditions that led to the global financial crisis years ago, namely rising inequalities and asset bubbles.