Domestic and regional markets key to faster economic growth

Five years after the onset of the global financial crisis, the world economy remains in disarray.

This is according to a new report, “Adjusting to the changing dynamic of the world economy”, by the United Nations Conference on Trade and Development (UNCTAD).

In the report, UNCTAD indicated that developed countries must act more decisively to address the fundamental causes of the crisis, in particular rising income inequality, the diminishing economic role of the State and the predominant role of a poorly regulated financial sector.

UNCTAD Secretary-General Dr. Mukhisa Kituyi said developing and transition economies that are overly dependent on exports for growth need to reconsider their development strategies and rely more on domestic and regional demand.

“The deceleration in the US, the continued contraction in much of Europe represents a very depressed traditional market for export led growth. In addition to the traditional emphasis on the importance of export led growth, development requires now substantial balancing act and substantial adequate attention given to domestic and regional market,” he stated.

Dr. Kituyi also stressed that the key message for developing the smaller economies is the critical importance of regional integration.

“…While regional integration in the past has basically meant expanding the scale and perhaps making more significance for direct foreign investment, it acquires a new meaning to grow regional scale as a primary target of regional movement of goods and services in a way that complements the dependency on export markets that have become much more volatile.”

The UNCTAD report further pointed out that global economic growth is not expected to recover much this year, and may even decelerate slightly to 2.1 per cent compared to an average of 2.2 per cent last year. (TL)