UN official: Trade tensions threaten world economic activity

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Global trade tensions may lead to a sharp slowdown in economic activity, UN Undersecretary General for Economic and Social Affairs Liu Zhenmin warned on Monday.

Global trade tensions continue to escalate, Liu told the UN General Assembly's Second Committee, which is in charge of economic and financial affairs.

While the direct impact on trade flow remains limited, world trade growth has eased to about four percent in 2018 after expanding by more than five percent in 2017, said Liu.

Liu Zhenmin speaks at the 2018 Boao Forum for Asia. /VCG Photo

A prolonged episode of uncertainty in the global trade arena has the potential to severely impact business and consumer confidence, asset prices, and investment behavior. This can lead to a sharp slowdown in economic activity, he warned.

"The spiral of protectionist and retaliatory measures poses setbacks to the multilateral trading system, as well as to multilateralism more broadly."

He also warned that financial vulnerabilities have been rising in many developing countries. "This is exposing them to exchange rate pressures, increased financial volatility or sudden capital withdrawal," he said.

Notably, countries with marked vulnerabilities such as fragile GDP growth, elevated political uncertainty, or large current account and fiscal deficits, have become more susceptible to financial volatility. They are at greater risk of contagion from external shocks, he said.

In a number of countries, the undercurrent of geopolitical tensions also has the potential to severely disrupt economic activity. Climate risks cloud the outlook in weather-sensitive regions, especially small island developing states, he said.

The ongoing rise in economic risks makes it all the more imperative that policymakers build resilience in advance of any forthcoming economic shocks, said Liu. "We need to bolster the resilience of our economies and societies while improving the lives of the people who are most vulnerable."

Source(s): Xinhua News Agency