It is said that the world is heading towards another economic slowdown after the 2008 financial crisis. Examine the trends in economic growth across advanced and emerging economies.
Published: October 14, 2019
The data on the world economy, trade and capital flows suggest that the world economy is on the edge of a recession. World GDP which was at 3.8 per cent in 2017, fell to 3.6 per cent in 2018 and is now projected to be 3.2 per cent in 2019.
Trends in Economic Slowdown
- Both 39 Advanced Economies (AEs) and 23 Emerging Economies (EEs) have been experiencing a downturn for the last two years. While AEs are projected to grow at 1.7 per cent in 2019 against 2.4 per cent in 2017, the EEs are set to experience 3.8 per cent growth in 2019 from 4.8 per cent in 2017.
- Along with structural problems issues such as the geopolitical uncertainty, escalating trade war between US and China, and lack of consensus among the G-7 and G-20 member countries to push world trade and growth has had an adverse impact on growth.
- Investors are worried about the slump and that is clearly reflected in capital flows and stock markets across the countries.
- Growth and trade go hand in hand. The spectacular growth of the world economy between 2003-2008 till the Global Financial Crisis (GFC) was well supported by world trade. But world trade growth has been shrinking since 2017. It fell to 3.7 per cent in 2018 from 5.5 per cent in 2017 and is projected at 1.6 per cent in 2019.
- Even though the IMF forecasts an upward projection for world trade in 2020, there is great uncertainty due to the ongoing US-China trade war.
- Individually, the world’s top 10 economies are slowing down. The US which is the largest economy of the world has a projected growth of 2.3 per cent in 2019 from 2.9 per cent in 2018, China is growing at its slowest pace in the last three decades.
Hence it is said that the world is heading towards another economic slowdown and there is a call for International cooperation to arrest this slowdown.
Model Questions Category: 060 - Economic Growth Development