UNITED NATIONS, May 26 (Reuters) - The United Nations revised upward on Wednesday, May 26, its forecast for world economic growth this year, but said recovery from the global crisis was still slowed by joblessness, debt and sluggish credit flows.
"The recovery … is uneven across countries," said a mid-year update to an annual report issued last December.
"While growth prospects for some developing countries are encouraging, economic activity is lackluster in developed economies and below potential elsewhere in the developing world."
The report by the U.N. economic division spotlighted strong advances in East and South Asia, especially powerhouses China and India, but only slight improvement in the euro zone, recently afflicted by a debt crises in Greece and other southern European nations.
It predicted world growth for 2010 at 3.0 percent, a rise of 0.6 percent from its last estimate. "Unprecedented government support worldwide" in the form of stimulus packages had caused global financial markets to progressively stabilize, it said.
The International Monetary Fund last month put the world growth rate at 4.2 percent. U.N. officials said different calculation methods accounted for most of the difference.
But the U.N. report, which said world output fell by 2.0 percent last year, cautioned that "the recovery of economic activity at the global level is weaker and slower than that observed after previous recessions of recent date."
"Important weaknesses" in the world economy included unemployment, with the number of jobless people increasing by more than 34 million worldwide in 2009 alone. At present rates it was likely to take four to five years to bring unemployment down to pre-crisis levels, the report said.
SLOW CREDIT FLOWS
Despite huge injections of cash by governments into the financial system, credit flows to non-financial sectors in many countries, especially the major developed ones, remained slow, the report said.
At the same time the crisis and government responses to it had damaged the public finances of some countries, including southern European nations and Ireland. This has fostered "a new source of financial instability."
U.N. economists warned, however, against hasty and drastic fiscal measures to cut budget deficits.
"The fine line which governments will have to walk is between seeking to adjust the fiscal balances while at the same time continuing stimulating the economies to avoid going further down and with that having increased debt ratios," senior economist Rob Vos told reporters.
"If all European countries now would decide to consolidate fiscally, that would take away the present stimulus to the economies in Europe … which could slow the recovery and could be a self-defeating process."
The report forecast U.S. economic growth this year at 2.9 percent — an increase of nearly 1 percent over its previous estimate — but said this would slow to 2.5 percent next year as stimulus packages faded out.
It predicted China’s growth would be 9.2 percent and India’s 7.9 percent, but said growth in the European Union would be just 1.0 percent, and in Japan 1.3 percent.
