The conference’s World Trade and Development Report 2005 predicts that the US economy may run out of steam before other countries or regions are able to take its place as the world’s main growth engine.

The countries of the European Monetary Union have been unable to pull out of a long economic stagnation and Japan, despite some improvement, is still struggling with deflation, Unctad said.

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Instead, several populous Asian countries, notably China and India, have emerged as the new growth drivers. These countries’ vigorous expansion and their appetite for natural resources have enabled many of their developing-country trade partners to gain windfall profits from rising commodity prices and the surging demand for intermediate products.

Unctad economists said that imbalances in global current accounts must be tackled in a co-ordinated, multilateral way if the recent progress towards the Millennium Development Goals was not to be squandered.

The report argued that economic imbalances must be rectified to avoid recession and slowdown. This applied to the developed world, it said, where growth had depended excessively on the US economy, and the developing world, where economies were fragile.

Unctad warned that a correction, especially to the external deficit of the US, would have a deflationary impact on the world economy if it were sought through massive exchange-rate appreciation in China and other Asian countries.

Such a development would complicate China’s attempts to integrate its vast pool of rural workers into a modernising urban economy, which would threaten the country’s progress in reducing poverty. It would also hinder other developing countries in achieving the development goals.

The Unctad report recommended that international initiatives to alleviate poverty and achieve the development goals should recognise that global economic imbalances must be rectified in a way that allows Chinese and Indian growth to continue because of its positive repercussions for less wealthy countries.