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Survey of Economic and Social Developments in the ESCWA Region 2007-2008

image of Survey of Economic and Social Developments in the ESCWA Region 2007-2008
This year’s Survey builds on the right to development themes adopted in previous issues and focuses on two significant concerns that have long constrained the right to development in the United Nations Economic and Social Commission for Western Asia (ESCWA) region: capital flight and unemployment. The publication illustrates recent economic trends and developments in the ESCWA region, capital flows to the region, discusses rights-based employment creation, and gives synopsis of integrated social policies. It concludes with a rights-based macroeconomic policy for the ESCWA region.

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Recent economic trends and developments in the ESCWA region

The expansion of the world economy eased in 2007 and towards the end of that year the prospects for 2008 became significantly less certain. In terms of real gross domestic product (GDP), the world economy grew 3.7 per cent in 2007 (table 1), which is moderately lower than the increase registered in 2006. By the summer of 2007, the credit crunch in the financial markets in the United States of America and Western Europe had become apparent. Over a short period of time, this has resulted in radical changes to the risk assessments and economic behaviour of world economic actors. The complications and controversies in risk valuations embodied in securitized financial products made appropriate adjustments to the balance-sheets of affected financial institutions difficult. In developed countries, the systemic risk of financial covenants and regulations attached to complicated securitized products has created a higher degree of uncertainty in the financial sector. Despite a series of interventions by central banks in developed countries, notably the Federal Reserve System of the United States, in aggressively easing monetary policy by lowering interest rates and providing significant amounts of additional liquidity, the credit turmoil continued in developed countries. Given this weakening in the financial sector, economic actors in developed economies, particularly on the production side, have become more risk-averse.

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