The world economy risks suffering a sharp slowdown in 2020 that would derail international efforts to tackle the mounting climate emergency and heightened poverty around the world, the United Nations has warned.
In a flagship report ahead of the annual gathering of world leaders in Davos next week, the international governmental organisation sounded the alarm that trade tensions between major countries threatened to serve as a brake on growth, with damaging consequences for sustainable development.
The UN said that rumbling trade tit-for-tats between the US and China had dragged down economic growth in 2019 to the lowest level in a decade, with the prospect that a renewed flareup, financial turmoil, or an escalation of geopolitical tensions could derail a recovery this year.
Davos is a Swiss ski resort now more famous for hosting the annual four-day conference for the World Economic Forum. For participants it is a festival of networking. Getting an invitation is a sign you have made it – and the elaborate system of badges reveals your place in the Davos hierarchy. The meeting is sponsored by a huge number of international banks and corporations.
For critics, “Davos man” is shorthand for the globe-trotting elite, disconnected from their home countries after spending too much time in the club-class lounge. Others just wonder if it is all a big waste of time.
The 2020 meeting is being advertised as focusing on seven themes: Fairer economies, better business, healthy futures, future of work, tech for good, beyond geopolitics and how to save the planet. Young climate activists and school strikers from around the world will be present at the event to put pressure on world leaders over that last theme.
The warning comes after Donald Trump signed the first phase of a new trade deal with China on Tuesday, dialling down the trade standoff between the world’s two biggest economic superpowers.
Although the UN said that easing trade tensions should help to propel global GDP growth to around 2.5% this year from a 10-year low of 2.3% in 2019, it warned the potential for relapse was high.
Failure to keep the risks in check would mean GDP growth in 2020 slumping to about 1.8%, with knock-on consequences for government efforts to hit their sustainable development goals, it added.
António Guterres, secretary-general of the UN, said: “These risks could inflict severe and long-lasting damage on development prospects. They also threaten to encourage a further rise in inward-looking policies, at a point when global cooperation is paramount.”
In a pivotal year for the US as Trump seeks reelection, the UN forecasts the US growth rate would slow sharply from 2.2% in 2019 to 1.7% this year. It said subdued business confidence following the two-year trade conflict, as well as the waning impact of tax cuts introduced by Trump earlier in his presidency, were set to drag down growth in the world’s largest economy.
It also predicts that growth in China would ease to around 6% this year, down from 6.1% in 2019, continuing a gradual slowdown in the world’s second largest economy following years of rapid development.
Against a backdrop of continued global uncertainty over trade, economic growth in the EU is forecast to remain relatively weak compared with recent years, amid weaker levels of manufacturing output. GDP growth is expected to accelerate slightly from 1.4% in 2019 to 1.6% this year.
Beyond the headline measurement of GDP, which is often criticised for failing to capture many aspects of living standards, the UN warned that other measures of wellbeing painted a bleak picture in several parts of the world.
It said that the climate emergency, persistently high inequalities and rising levels of food insecurity and undernourishment continued to affect the quality of life in many nations.
Economic growth while limiting carbon emissions should be a priority, it added, saying that the two aims were not necessarily conflicting ambitions. It said the mission for a greener world economy would bring not only environmental and health benefits, but also growth opportunities for nations as they invest in a low-carbon future.
Elliott Harris, UN chief economist, said governments around the world should move beyond a narrow focus on promoting GDP growth, and instead aim to enhance well-being in all parts of society.
“This requires prioritising investment in sustainable development projects to promote education, renewable energy, and resilient infrastructure,” he added.
