UN urges boost to spending and jobs

TIGHT interest rate policies should be dropped and countries should boost spending and employment to ensure that the nascent economic recovery has a chance to strengthen, according to the United Nations' economic agency, writes Robert Chote.

Unctad, the UN Conference on Trade and Development, forecast that the world economy would grow by 2.5 per cent this year, up from 1.7 per cent in 1993. The boom in Asia is an important motor for growth, its annual Trade and Development Report argues. Unctad also warned that inadequate world demand might fuel trade conflicts among countries competing for export markets.

'Slowly, the world economy is picking up . . . (but) prospects for a strong global performance depend critically on whether and how far the developed world takes measures to remedy the persistent weakness of demand.'

The industrial countries and main international monetary and aid agencies were criticised for relying only on the private sector to strengthen development programmes, and for running economic policies that treated inflation as a greater evil than unemployment.

Unctad forecast that the economies of developing countries would grow by an average of 4 per cent. It argued for intervention by the state sector, arguing that the benefits had been clear in Japan, Taiwan and South Korea.