UN warns global growth will shrink without new jobs
THE global economy will shrink this year when adjusted for population growth unless governments create jobs, prevent sovereign debt defaults and shore up fragile banks, the United Nations warned yesterday.
The annual UN World Economic Situation and Prospects report forecast says its downside scenario would see economic growth of just 0.5pc which would not be enough to keep pace with the world's population growth, resulting in a downturn in average per capita income.
In this downside scenario, the European Union economy would contract by 1.6pc in 2012, with Germany, France and Britain all sliding into recession.
The report believes global growth could reach 2.6pc this year and 3.2pc in 2013 if action is taken to create jobs and shore up fragile banks. The report assumes a 50pc cut in Greek sovereign debt and a minor US economic stimulus.
In Dublin, the Bank of Ireland economist Dan McLaughlin predicted that Irish gross domestic product would expand 1pc this year after posting a similar increase in 2011.
That would be well below the official forecasts and would leave the Government hard pressed to hit IMF and EU targets imposed after the bailout. The economy will benefit less from exports and more industrial demand as foreign-owned factories buy equipment, he predicted.
Dr McLaughlin added that the unemployment rate would be around 20pc if people were not dropping out of the labour force, returning to education or leaving the country.
Almost 150,000 people have left the labour force since 2008 as they emigrate, return to their homes abroad, go back to college or simply give up searching for work, the bank said yesterday in a report. The total number of people counted as unemployed would be 454,000 rather than 303,000 without these departures.
The bank predicts that another 20,000 jobs will disappear this year, but says the unemployment rate will remain stuck at 14.3pc because of emigration. Around 44,000 jobs vanished last year, which helped to push down the workforce to around 2.1 million by the autumn from a high of 2.25 million in early 2008.
Unemployment has yet to stabilise and the bank did not forecast when the economy may reach the bottom. The jobless rate steadied in the first half of last year but unemployment began growing again in the autumn when the short-lived period of growth spluttered to a halt.
Jobs were lost in agriculture, financial services, manufacturing, education and health last year but there were gains in the retail sector, hotels, restaurants and construction.