UN Analyzes the World Economy

GLOBAL economic growth for 1992 will be modest at best - with world gross domestic product rising by a minuscule 1 percent in 1992, although climbing to 3 percent in 1993, according to a United Nations study released this week.

Even current growth, small as it is, could be derailed by unexpected economic shocks, says the UN. The "downside risks are great in the present climate of pervasive uncertainty."

Nor is the UN alone in its assessment of lackluster global recovery. Somewhat similar new reports just released here - by the Paris-based Organization of Economic Cooperation and Development (OECD), and The Conference Board, an international business organization - also identify a recovery marked more by sluggishness than sprightliness.

The UN findings are contained in the World Economic Survey 1992, a study published annually by the Department of Economic and Social Development of the United Nations.

Among key findings of the 1992 report: Global output per capita plunged by over 2 percent in 1991, after stagnating in 1990; African and Eastern European economies continue to be hard hit by tepid growth, with Africa barely keeping pace with population growth, and former East-bloc nations are caught in the grip of a "savage economic contraction."

Still, the report finds several bright spots in the global setting. The world debt crisis has eased somewhat, with creditor nations helping to renegotiate third-world debt; energy prices have stabilized, with the average price of a barrel of oil expected to be in the $15 range for the next 18 months; and global trade is expected to grow about 4.5 percent in 1992, compared to 3 percent in 1991. The UN finds last year's expansion in world commerce especially remarkable, considering the world recession.

The UN predicts that US gross national product will grow by 1.6 percent for all of 1992, increasing to 3.5 percent next year; the nations of the European Community will grow at an aggregate rate of around 1.9 percent this year and accelerate to 2.6 percent in '93; and Japan will grow at a rate of 1.9 percent in '92 and 3.2 percent in 1993.

"The UN global outlook is somewhat influenced by the poor performance of the African and Eastern European economies," which have been hard hit by the recession and the breakup of the former Soviet Union, says Peter Perkins, an economist with DRI/McGraw-Hill, an economic consulting firm in Lexington, Mass. DRI/McGraw-Hill tends to have a slightly more optimistic view of current global growth, Mr. Perkins says.

Nonetheless, DRI also sees continued sluggishness for the US this year. DRI had been assuming that the American economy, as measured by GNP, would expand at a rate of around 2 percent in 1992. This week DRI is expected to lower that estimate to 1.8 to 1.9 percent. Excluding the former East bloc, the world economy should grow around 2.5 percent in 1992, Perkins says.

He adds that 1993 will be a better year all around, "for the global economy and certainly for the US."

As the UN study notes, however, the tepid pace of world growth provides little steam for meaningful reduction in global unemployment, homelessness, and poverty. Indeed, many national governments, according to the UN, have worsened the growth problem by slashing budgets, reducing services, and lowering public service payrolls.

"The pendulum may have swung too far in the direction of [free] market orientation, leading to a neglect of the role and responsibility of the State in development," the UN report says.

Both the OECD and the UN reach similar conclusions about reasons for slow recovery in the US; factors include the limited scope for fiscal stimulus, given massive federal debt, as well as high indebtedness by households and businesses. The UN study says that the global economy would benefit from a slower pace of budget reductions in the US, Germany, and Japan.

The former East-bloc nations, including the Soviet Union, remain among the most troubled world economies in terms of immediate outlook. Economic output in Eastern Europe contracted by 16 percent last year and will contract another 12 percent this year. Contraction is expected to continue again in 1993, although at a slower pace.

Unemployment is up throughout the region, as former state-run enterprises attempt to make the transition to market-oriented firms.