UNCTAD issues gloomy forecast

GENEVA, Switzerland, Sept. 5 (UPI) -- The U.N. Conference on Trade and Development in Geneva, Switzerland, noting the current economic climate, has issued a gloomy global economic outlook.

In its 2008 trade and development report, the UNCTAD largely blamed instability in international financial, currency and commodity prices for its conclusions. The report said world output is expected to grow by around 3 percent in 2008, almost a full percentage point less than in 2007.

The report said the short-term outlook is better for the developing world, with growth likely to exceed 6 percent. However, it said the outlook for 2008 and 2009 is overshadowed by the subprime mortgage crisis which has spread beyond the United States, causing a squeeze in liquidity and credit.

It said abrupt exchange-rate adjustments and shifts in current-account balances could aggravate the situation. Other factors contributing to the gloomy outlook include speculation, which has played a major role in recent commodity price swings, and doubts about the direction of monetary policy in some major developed countries.

The report said central banks of major developed countries should not further raise interest rates as that might further worsen global slowdown. The report said alternative measures needed for a non-recessionary correction could include stronger stimulation of domestic spending and imports in major surplus economies and measured appreciation of the Chinese currency.

The report called for stricter regulatory measures to contain speculation and achieving greater commodity price stability.