Euro debt crisis remains biggest threat to world economy – UN Report

A new UN economic report has found that the current euro debt crisis still remains the biggest threat to the global economy.

The report released June 7 entitled “World Economic Situation and Prospects (WESP) 2012 mid-year update” noted that despite some scattered signs of improvement in recent months, the global economic situation is still challenging.

Released by the UN Department of Economic and Social Affairs (DESA), the WESP report noted that the debt crisis in the euro area (especially in Greece) remains the “biggest threat to the world economy”.

It added that an escalation could trigger severe turmoil in the financial markets and a sharp rise in global risk aversion, leading to a contraction of economic activity in developed countries.

The WESP warns that global economic growth will likely remain tepid in 2012 with most regions expanding at a below-potential pace. A further sharp rise in energy prices may also stifle global development.

“Even if further deepening and spreading of the debt crisis in the euro area can be avoided, economic activity in the European Union is expected to stagnate in 2012,” the DESA stated.

World trade growth will slow further to 4.1% in 2012, down from 13.1% in 2010 and 6.6% in 2011, it projected.

By Ekow Quandzie