UN lowers global economic growth estimate as modest pace continues; Latin America worsens

New York, May 20, 2015 (AP).- The United Nations is lowering its growth estimate for the global economy this year, saying its previous forecast of 3.1 per cent growth in 2015 is now more likely to be 2.8 per cent instead.

The World Economic Situation and Prospects mid-year report released yesterday says the dip reflects a worsening in Latin America in particular as the region deals with lower commodity prices.

Overall, the forecast expects modest global growth the rest of this year and next year, which could see an improvement to 3.1 per cent.

The U.N. is keeping a wary eye on upcoming monetary policy changes in the United States, where the Federal Reserve is "expected to start raising interest rates in the second half of 2015," as well as uncertainty about the Greek debt crisis' effect on the eurozone and possible "spillovers" of conflicts including Yemen, Syria and Ukraine.

"In the case of Yemen ... the main source of risk is the possible closure of the route through the Bab el-Mandeb Straits, used by tankers to transport crude oil out of the Gulf region," the report says.

Around the world, the drop in prices for oil and other commodities has hurt countries whose economies largely depend on them, while commodity-importing countries benefit from being able to buy more for less. Oil prices are expected to recover slowly, the report says.

Russia has been hit hard by the oil price decline. Its economy is expected to shrink by 3 per cent this year and grow by just 0.1 per cent in 2016.

The report sees India's growth surpassing China's both this year and next. India is expected to grow by 7.6 per cent this year and 7.7 per cent next year, while China's strong growth of recent years continues to settle at 7.0 per cent this year and 6.8 next year.

The United States, Japan and the European Union are more sedate. The U.S. is expected to grow by 2.8 per cent this year and 2.7 per cent next year. Japan's growth is projected at 1.2 per cent this year and 1 per cent next year, while the EU is set to grow 1.9 per cent this year and 2.1 per cent in 2016.

Developing countries' average growth is seen as staying at 4.4 per cent.

"While the recovery in developed economies is improving, many countries still face considerable headwinds from the legacies of the global financial crisis," the report says.

The forecast says job creation is still weak, with a worrying note for the future: "The global youth unemployment rate is estimated at 13 per cent, three times higher than the overall rate, as young people were disproportionately affected by the financial crisis”.

Africa overall is expected to see 4.0 per cent growth this year and 4.8 per cent growth next year. "A large part of the downward revisions for North Africa and for Africa as a whole is due to Libya, which remains trapped in a civil war," the report says.

Latin America and the Caribbean make up the shakiest region outside Russia, with just 0.5 per cent growth expected this year and 1.7 per cent next year. "Venezuela is falling into a deeper recession, while Brazil and Argentina are expected to contract by 1.1 per cent and 0.4 per cent in 2015, respectively," the report says.

East and South Asia are expected to keep growth steady at 6.2 per cent this year and 6.1 per cent in 2016. "East Asian exports are projected to remain relatively strong," the report says.