Anticipation Of Recovery Is Just a Fiction, It Is Not There

“When in doubt, tell the truth.”
–Mark Twain, author

Our best hope of coming to grips with the trouble we are in is to know just what we are up against. In fact, history suggests that being honest during a time of crisis can yield tremendous benefits, including motivating people to alter bad behavior and come up with creative approaches to solving seemingly intractable problems.

Unfortunately, few of those who pull the strings nowadays have figured this out. Instead, they keep feeding us lies and spin. Every once in a while, though, the unvarnished truth manages to slip out. In “Current Market Rebound Not a ‘Real Recovery’: UNCTAD,” Agence France-Presse reports on one such occurrence.

A UN think tank on trade has warned that the current financial market rebound is not a “real recovery” and that any world economic growth recorded in 2010 was unlikely to exceed 1.6 per cent.

“The depth of the recession has been so important that of course there will be a rebound … but we still do not see that this is a real recovery,” said Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development (UNCTAD).

“The actual increase in the commodities prices is mainly driven by appetite for more risk,” he added.

This appetite could also be “reversed at short notice, depending on the pace of recovery and financial market sentiment”.

Improving economic data including slowing job losses have been heralded by financial markets as green shoots of economic recovery, but UNCTAD poured cold water on the optimism.

Chief economist Heiner Flassbeck said the markets had been fuelled by financial speculation that in turn was driven by expectations of recovery.

“But anticipation of recovery is just a fiction, it is not there,” he added.

The UNCTAD report noted rather: “Tumbling profits in the real economy, previous over-investment in real estate and rising unemployment will continue to constrain private consumption and investment for the foreseeable future.”

“Against this background, global GDP growth may turn positive again in 2010, but it is unlikely to exceed 1.6 per cent,” it added.

The report also slashed its 2009 forecast from a growth rate of 2.9 per cent predicted last September to a contraction of about 2.7 per cent.

Developed economies should post a 4.1 per cent contraction, with Japan showing the deepest shrinkage of 6.5 per cent over 2009.

Latin America is forecast to post a 2 per cent contraction.

Africa and Asia should hold up the overall global economy, with average growth of 1.2 per cent for Africa and 2.6 per cent for Asia.

As countries sought to emerge from the recession, Panitchpakdi pointed out, attempts to tackle climate change represented a “new opportunity for new investment”.

“Climate change mitigation does not contradict development goals but is a process of structural change worldwide that offers enormous economic opportunities for enhancing development,” said UNCTAD.

This is particularly true for developing countries, which stood to gain if they were able to tap the opportunity to produce their own green products rather than relying on western imports, added Detlef Kotte, an UNCTAD economist.

“It is important to review the concept of climate change mitigation. We can see it not only as a cost but as a process that creates income. There are huge market opportunities in more environmentally friendly goods,” he explained.

Subscribe by RSS Subscribe by Email