Trade and develpoment report 2013 was published by United Nations Conference on trade and development (UNCTAD). The report faces the strategy of some developing and transition economies to mitigate the impact of the financial and economic crises by means of expansionary macroeconomic policies. But with the effects of such a response petering out and the external economic environment showing few signs of improvement, these economies are struggling to regain their growth momentum.
Prior to the Great Recession, exports from developing and transition economies grew rapidly owing to buoyant consumer demand in the developed countries, mainly the United States. This seemed to justify the adoption of an export-oriented growth model. But the expansion of the world economy, though favourable for many developing countries, was built on unsustainable global demand and financing patterns. Thus, reverting to pre-crisis growth strategies cannot be an option. Rather, in order to adjust to what now appears to be a structural shift in the world economy, many developing and transition economies are obliged to review their development strategies that have been overly dependent on exports for growth.
The report suggests an indispensable rebalancing of the drivers of growth of developing and transition economies, with greater weight given to domestic demand. It will require a new perspective on the role of wages and the public sector in the development process. Distinct from export-led growth, development strategies that give a greater role than in the past to domestic demand for growth can be pursued by all countries simultaneously without beggar-thy-neighbour effects, and without counterproductive wage and tax competition. Moreover, if many trade partners in the developing world manage to expand their domestic demand simultaneously, they can spur South-South trade.