The Hindu : Iraq war could impact growth: U.N. survey

Online edition of India's National Newspaper
Friday, Apr 18, 2003

National

National

Iraq war could impact growth: U.N. survey

By Sushma Ramachandran

NEW DELHI April 17. The United Nations' annual Economic and Social Survey for Asia and the Pacific today warned that the Iraq war and its aftermath along with sluggish growth in developed economies could have an impact on the GDP growth in India during 2003. It originally forecast a growth rate of around 6 to 7 per cent from 2003 to 2005, but has revised the figure down to 5.1 per cent for the current year in view of these volatile external factors.

The report notes that sustaining growth in the region will depend primarily upon domestic policies given the absence of any evidence of a strong pick up in the global economy at least in the first half of this year, the war in Iraq and other geopolitical uncertainties.

The survey brought out by the UN's Economic and Social Commission for Asia and Pacific (ESCAP), has revised its GDP growth projection downwards largely to the expected impact of the Iraq war as well as continuing depressed demand in the U.S., Japan and Europe.

Even after the revision in the ESCAP forecast, India continues to be one of the fastest growing nations after China, slated to grow by 7.5 per cent, Vietnam — by 7 per cent, and Fiji by 5.2 per cent. While the global growth rate has been revised to 2.3 per cent from the earlier stance of 2.8 per cent, the GDP growth for the developing nations of the Asia-Pacific region was revised to 5 per cent from 5.4.

On the policy challenges for countries in the region, the survey says that the domestic demand stimulus measures have relied on a mixture of fiscal and monetary policies. However, with levels of public debt exceeding 50 per cent of the GDP in most economies of the region, the question of fiscal consolidation has to be tackled in earnest before too long. In the case of monetary policy also, as a result of falling inflation, it says interest rates have reached quite low levels so that the scope for further reduction is limited in most countries.

Besides, it urges that the programmes of reform of the corporate and financial sectors should continue to be implemented with renewed vigour to enhance investor confidence. It says that the levels of investment in the private sector are still below pre-1997 levels in Southeast Asia. Without a pick up in private investments, it cautions, medium term growth is likely to be jeopardised.

The survey had originally observed that the prospects in 2003 are for a pick up in the overall GDP growth rate in the South Asian countries of India, Pakistan and Sri Lanka. However, it maintained that the uncertainties remained, such as the military conflict in Iraq and this along with tentative growth in the global economy could affect export growth adversely.

In addition, the report pointed out that the South Asian region is a heavy importer of energy and higher energy prices would be a negative development for both growth and inflation in this area.

Printer friendly page
Send this article to Friends by E-Mail

National