The United Nations Conference on Trade and Development (Unctad) ‘Trade and Development Report 2022’ outlines policy actions to avert economic crisis and strengthen support to developing countries.
In the report, Unctad economists analyse the state of the global economy and they are forecasting lower growth over the next two years.
According to the report, advanced economies need to change course in their monetary and fiscal policies to avoid inflicting worse damage than the financial crisis in 2008 and the Covid-19 shock in 2020.
The cascading crises resulting from the pandemic, combined with debt distress, inflation, climate change and the war in Ukraine have already turned a global slowdown into a downturn, the report indicates.
The report also covers the economic and development outlook in each developing region.
According to the report, Africa’s economic activity is expected to expand by a moderate 2.7% this year, following a rebound of 5.1% in 2021.
This reflects several new challenges, including high international food and fuel prices, financial shocks owing to the stronger-than-anticipated tightening of monetary policy
in advanced economies and acute risks of food insecurity in many parts of the region.
As a result, an additional 58-million non-poor Africans will fall into extreme poverty this year, adding to the 55-million Africans already been pushed into extreme poverty because of the pandemic, the report outlines.
In the context of a severe weakening of European and other trade partners, growth on the continent will continue decelerating to 2.4% in 2023.
In South Africa, growth in the first quarter of this year was noted to have surprised on the upside, although a severe slowdown is expected in the second quarter, following the impact of flooding in the southeast of the country.
While private investment has strengthened on the back of the recovery, public sector investment remains weak.
Household spending has continued to expand but is likely to soften in the second half of the year, with higher inflation, lower asset prices and rising interest rates, the report shows.
Meanwhile, tourism, hospitality and construction should see stronger recovery as the year progresses.
Other headwinds include subdued investment and business sentiment, elevated prices for food and key imported inputs, the high indebtedness of the middle class and increased volatility of capital flows, which compound longer-term challenges, such as the high unemployment and inequality.
As a consequence, the economy will show weak growth rates of 1.4% and 1.3% this year and 2023, respectively, Unctad says.