World Economic Situation and Prospects 2016
The United Nations has offered its annual assessment of prospects for 2016 in its World Economic Situation and Prospects (WESP) report. It opened with: “The world economy stumbled in 2015, amid weak aggregate demand, falling commodity prices and increasing financial market volatility in major economies.” In addressing the impact of the downward pressure on economies, UN ASG Lenni Montiel, explained that many countries, “specifically LDCs which rely on commodity exports, will be unable to sustain public spending on health, education, and climate change adaptation and mitigation efforts.” With LDCs reliant on the commodity export – most averaging 16% of GDP from the commodity industry – LDCs will not reach sustainable development goal 8, target 8.1, of 7% economic growth per year in GDP. (See WESP 2016, Box I.1 for more detailed outline of economic prospects for LDCs.)
“Tax evasion, tax avoidance and illicit financial flows are a major difficulty in efficient resource mobilization” said Montiel. He quoted the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project report, saying “4-10% of global income tax is evaded through profit shifting”. Rectifying this through global policy coordination, Montiel said, “will shore up and mobilize resources.” The report indicates that the time is now to augment trade and ODA flows to facilitate public private partnerships that support public investment and enhance tax cooperation. This, in turn, could redirect financial resources for sustainable development in countries facing challenging economic situations. The forthcoming ECOSOC special meeting on international cooperation in tax matters on 27 May offers an opportunity to expedite resource mobilization.
The WESP 2016 report also highlights positive trends such as: the slowing of global emissions; and the creation of jobs through increased public and private investments in renewable energy. This is evidence that decoupling economic growth from carbon emissions is not a myth. This trend is also helping to demonstrate “low-carbon technology as adequate investment to the business world,” Montiel said.
Policy efforts should seek to sustain existing momentum in the light of low oil prices. Montiel explained, “low oil prices have the ability to derail development,” and policy support at national, local and regional levels is needed to sustain positive trends. The report states:
In oil-exporting economies, persistently low oil prices should eventually encourage public finance reforms, including discretionary spending, and support policies targeting economic diversification. Oil-importing developing countries, on the other hand, should take advantage of low oil prices to redirect their fiscal savings to productive investments.
Montiel went on to call out developed countries, stating that “the West is not meeting its financial responsibilities.” Growth predictions for 2016 indicate the time is now for developed countries to actually meet or even surpass their 2016 0.7% GDP commitment for official development assistance. Re-distributive policies, “as the West reminds us”, said Montiel, “can play a substantial role in poverty reduction.” According to the report, “re-distributive policies or other fiscal or employment policies that prevent inequalities from rising can, thus, significantly accelerate poverty reduction for a given rate of economic growth.” The global economy will benefit from a more effective use of re-distributive policies, including public investment in health and infrastructure, building a stronger social safety net to combat poverty.
The 2016 UN World Economic Situation and Prospects report is downloadable in six languages.