Trade and Supply Chain Disruptions are my honor to moderate today’s dialogue on the latest developments in the global economy.

As moderator, I would like to share some personal reflections and bring forward a few points for consideration.

The encouraging news is that the world economy is gradually emerging from the global financial crisis.

However, the recovery remains fragile, and its momentum is slowing. According to the World Economic Situation and Prospects report before you, the United Nations forecasts global output growth of 3.3 percent in 2011 and 3.6 percent in 2012, compared with 3.9 percent in 2010.

Yet, growth is uneven across countries. Developing nations continue to register higher output growth, driving much of the global recovery. Still, this momentum is fading, primarily because recoveries in most advanced economies remain weak or uncertain.

Slow expansion in developed economies continues to weigh down the progress of developing nations. The premature shift towards fiscal austerity, amid persistently high unemployment, has not benefitted their own populations, nor the global economy for Trade and Supply Chain Disruptions.

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Moreover, policy approaches among major economies remain misaligned. This divergence risks further slowing the recovery and has increased financial instability, visible in volatile exchange rates and other indicators.

Advanced economies are still grappling with a jobs crisis. At the current pace of growth, it may take another four to five years for employment to return to pre-crisis levels. Meanwhile, the number of people unemployed for six months or longer continues to rise in many advanced countries, while youth joblessness remains particularly severe.

By contrast, many developing economies and transition countries, especially in Asia, have largely restored employment to pre-crisis levels. Nonetheless, challenges persist—many vulnerable people remain trapped in insecure work, and younger workers still struggle to access decent jobs of Trade and Supply Chain Disruptions.

Additional threats to growth and development have also surfaced. Natural disasters have become more frequent. Oil prices have surged. Since late 2010, food and energy costs have been rising once again.

While higher food prices may provide some benefit to farmers, it is the poorest communities who suffer the most, as rising food costs worsen poverty and food insecurity.

The growing incidence of natural disasters, combined with energy and food price shocks and the uncertain pace of economic recovery, jeopardize the hard-won gains of developing countries. The least developed countries, particularly in Africa and South Asia, face the gravest challenges. Without renewed commitment, many Millennium Development Goals (MDGs) will remain out of reach. Additional financial support is urgently needed—both to accelerate MDG progress and to fund large-scale investments that can make growth more sustainable and resilient, especially in LDCs.

Addressing these risks and uncertainties presents serious policy dilemmas for governments worldwide. Let me highlight a few priorities.

First, advanced economies must be careful not to adopt fiscal austerity too hastily, as the recovery is still fragile.

Second, the focus must remain on employment. Policies should aim at job creation, complemented by measures that foster structural transformation and productivity gains—laying the foundation for stronger, more durable growth.

Third, none of these efforts will succeed without stronger international policy coordination of Trade and Supply Chain Disruptions.

Finally, to ensure lasting development, including the achievement of the MDGs, we must secure adequate resources for developing countries, even in the medium and long term, despite austerity constraints in many advanced economies.

Allow me to raise a concluding point, this time in my capacity as Secretary-General of the UN Conference on Sustainable Development (Rio+20), scheduled for June 2012 in Rio de Janeiro. At Rio, we must take decisive steps to place the global economy firmly on the path of sustainable development. Doing so will require profound technological and societal transformation.

This, in turn, demands massive new investments, particularly in developing countries. Securing finance will be critical—not only to green our economies and safeguard environmental sustainability, but also to mitigate and adapt to the severe impacts of climate change, as highlighted in the 2009 and 2011 World Economic and Social Surveys.

Given the limited capacity of developing countries to mobilize long-term financing, a significant portion of these investments will need to come from international resource transfers.

Several initiatives are underway, but far more must be done. The success of Rio+20 will depend heavily on stronger commitments in both finance and technology transfer.

Today’s global economic and financial landscape is shaped by ecological, social, and political dynamics. It is increasingly clear that economic growth cannot endure unless it is environmentally and socially sustainable.

This is our understanding of the current development context.

The world cannot afford inertia or a fragmented, “go-it-alone” approach. We must embed the framework for sustainable development firmly within the multilateral system.

As I have outlined, there are clear pathways toward a sustainable recovery. Everyone will benefit—but only if we act collectively.

The global economy entered 2022 in a weaker condition than previously anticipated. With the spread of the new Omicron COVID-19 variant, several countries reinstated mobility restrictions. Rising energy costs and supply chain bottlenecks have triggered higher and more widespread inflation than earlier projected, particularly in the United States and many emerging market and developing nations. At the same time, the ongoing downturn in China’s property sector and a slower-than-expected rebound in private consumption have further constrained growth prospects.

Global economic expansion is projected to slow from 5.9 percent in 2021 to 4.4 percent in 2022—half a percentage point below the October World Economic Outlook (WEO) forecast. This reduction mainly stems from downward revisions in the two largest economies. In the United States, the removal of the Build Back Better fiscal package from baseline assumptions, earlier-than-planned withdrawal of monetary support, and ongoing supply shortages resulted in a 1.2 percentage-point downgrade. In China, pandemic-related disruptions from the zero-COVID strategy and persistent financial strains in the property market led to a 0.8 percentage-point revision downward. Global growth is expected to ease further to 3.8 percent in 2023. Although this marks a 0.2 percentage-point upgrade from the earlier forecast, the improvement largely reflects a rebound once current drags on activity fade in the latter half of 2022. This projection relies on the assumption that negative health impacts decline to minimal levels by late 2022, with rising vaccination rates worldwide and more effective treatments.

Inflationary pressures are expected to remain elevated longer than predicted in the October WEO, as supply chain disruptions and high energy costs continue through 2022. Provided inflation expectations remain anchored, inflation should gradually fall as supply-demand mismatches ease and monetary policy in major economies tightens.

The risks to the global outlook are skewed to the downside. The emergence of new COVID-19 variants could extend the pandemic and cause renewed economic setbacks. Moreover, persistent supply chain issues, volatile energy prices, and localized wage pressures create uncertainty about inflation and policy responses. As advanced economies raise interest rates, risks may emerge for financial stability, capital flows, currencies, and fiscal positions in emerging markets and developing countries—especially given the sharp rise in debt burdens over the past two years. Other risks could also materialize, including heightened geopolitical tensions and the persistent climate crisis, which keeps the likelihood of severe natural disasters high.

With the pandemic still exerting significant pressure, the need for a coordinated global health response has become even more critical. Ensuring universal access to vaccines, diagnostics, and treatments is vital to minimize the chances of dangerous new COVID-19 variants. This will require scaling up production, strengthening domestic delivery systems, and ensuring more equitable international distribution. Monetary policies in many nations will need to continue tightening to address inflation, while fiscal policies—operating with less room than earlier in the pandemic—must concentrate on health and social priorities, with targeted support for the most vulnerable. In this setting, international cooperation is crucial to maintain access to liquidity and to facilitate timely debt restructurings where required. At the same time, investment in climate action remains essential to mitigate the risks of catastrophic climate change.

Emerging markets have also broadened their use of industrial policies, though they rely less on subsidies and instead focus more on trade measures such as tariffs and export restrictions. In recent years, the world has witnessed a surge in trade barriers. Last year alone, governments introduced nearly 3,000 restrictions—three times higher than in 2019 (Chart 1).

Research indicates that industrial policies can be effective in addressing market inefficiencies, but they usually fail to significantly increase exports, while also being costly to implement.

At present, the world economy is at a turning point—shifting from an era of globalization toward one of deglobalization. It is worth recalling that in mid-1944, as a response to the Great Depression and persistent economic instability, the global community—under U.S. leadership—constructed a new international economic framework. This system, which included the International Monetary Fund, the World Bank, and the predecessor to the World Trade Organization, was designed to create a strong network of economic interconnections, built on the understanding that interdependence was essential for sustaining peace and prosperity.

For more than seven decades, policymakers worldwide recognized the importance of economic interdependence. Countries dismantled trade barriers and opened their economies to one another. On the whole, the results were remarkable: over sixty years, world trade grew twenty-fold, per capita income rose by twenty-seven times, and extreme poverty fell by nearly three-quarters.