The United Nations on Tuesday downgraded its world economic growth projections for 2015.
Citing low investment and deterioration in economies in transition such as Russia, the UN Development Policy and Analysis Division now predicts the world gross product will improve from 2.6 percent in 2014 to 2.8 percent in 2015 – a downward revision of 0.3 percentage points from projections made in January.
The agency also lowered its growth estimate for 2016 to 3.1 percent, 0.2 percent lower than the January forecast.
“The current world economic situation is characterized by five ‘lows’: low growth, low trade flows, low inflation, low investment, and low interest rates, combined with two ‘highs’: high equity prices, and high debt levels”, said Pingfan Hong, who directs the agency.
The mid-2015 World Economic Situation and Prospects report still warned of downside risks to the forecast depending on the impact of upcoming monetary policy normalization in the US, uncertainties in several EU countries, "potential spillovers" from geo-political conflicts and persistent vulnerabilities in emerging economies.
"These individual risk factors are interconnected and could be mutually reinforcing, potentially leading to a weaker-than expected expansion of the global economy", it said.
The agency also expressed concern that the overall low-key performance of the world economy since the global financial crisis of 2007-2008 could render lower growth a “new normal”.
Weak global investment not only restricts current growth but also reduces potential future growth, the report said.
“It is somewhat concerning that, despite highly accommodative monetary policies and historically low global interest rates, real investment has been weak in many parts of the world since the global financial crisis”, according to Ingo Pitterle, leader of the team that wrote the report.
The agency dramatically lowered its growth expectations for Russia, as lower oil prices continue to weigh heavily on oil exporting economies.
The Russian economy is now forecast to shrink 3 percent in 2015, although the agency projected in January that it would grow 0.2 percent.
“This will have negative spillover effects on other countries in the region", the report said.
