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A report released at the United Nations Conference on Trade and Development (UNCTAD) on Wednesday September 21, 2016 argues that globalization is contributing to a slowdown in developing economies in Africa and Latin America.
Dr. Taffere Tesfachew, Special Advisor to the Secretary General of UNCTAD said it would be a mistake to try and understand the economic challenges countries face in isolation.
“What is happening here is linked to what is happening in China, and what is happening in the US. This is one of the key messages of the report. Interdependence, interconnectedness of the global economy is now an absolute,” said Taffere.
The Trade and Development Report 2016 states that getting the world economy back on track requires that global leaders use bolder macroeconomic policies, strengthened regulation of finance and active industrial policies.
While globalization has contributed to lifting millions out of poverty, it has, on the other hand led to income inequality and the slowing down of the world economy has affected everyone.
“This stagnant growth in the last 6 years has created a situation that we call now, “2016 the year of living dangerously”. All over the world, you will not find countries that are doing very well. Even in Asia, the giants of growth such as China have to live with less than 7 percent growth, which is really good but for them it is unprecedented,” Taffere pointed out.
Findings show that the loss of economic momentum in the advanced economies is having knock-on effects for developing countries. African economies will grow on average only at 2 percent this year. The report shows that commodity producers remain particularly vulnerable.
“This has brought the end of the commodity boom, that is why many of these commodity dependent African countries; 57 percent on average of African counties export commodities, are vulnerable. Now prices have gone down including major things like coffee and definitely the price of oil. From the oil price drop, some countries have benefited because they are oil importers but other countries like Angola are going through serious trouble,” stated Taffere.
The commodity cycle is in its second year of a sharp downturn; the commodity price index is 5 percent below its 2003-2008 average. Growth and investment sharply slowed down in mining and oil exports.
Africa specific findings further show that countries in the region created an industrial base between 1960 and 1975, but structural adjustment policies in the 1980s and 1990s had negative impacts on the sector.