Essay On World Economy

Essay On World Economy-64
The “third arrow” of Abenomics, which was supposed to implement significant structural reforms and boost productivity, has been slow to materialize.

With anticipated escalation in trade conflicts, a contraction in world trade could drag down the global economy even more.

At the same time, the combined effects of rising interest rates and surging equity and commodity market volatility mean that financial conditions worldwide are tightening.

Although economists and business leaders complain that a 2.5 percent global growth rate is painfully slow, prior to the 1800s, the world’s economy never grew that fast for long; in fact, it never topped one percent for a sustained period.

Even after the Industrial Revolution began in the late eighteenth century, the average global growth rate rarely exceeded 2.5 percent.

In 2018, US growth was well above trend at 2.9%, though the acceleration was almost entirely due to a large dose of fiscal stimulus in the form of tax cuts and spending increases.

The impact of this stimulus will still be felt in 2019, but will diminish as the year progresses.The slowdown in China’s economy and the fallout from trade tensions between the US and China are drags on growth.Monetary policy will continue to be ultra-accommodative next year.The global economy started 2018 with strong, synchronized growth.But as the year progressed, momentum faded and growth trends diverged.The global recovery from the Great Recession of 2009 has just entered its eighth year and shows few signs of fading. Rather than rejoicing, then, many experts are now anxiously searching for a way to push the world economy out of its low-growth trap. Throughout this period, the global economy has grown at an average annual pace of just 2.5 percent—a record low when compared with economic rebounds that took place in the decades after World War II.These risks point to the increasing vulnerability of the global economy to further shocks, and the rising probability of a recession in the next couple of years.Based on estimates about sustainable growth in the labour force and productivity, we assess the trend, or potential, growth in the US economy to be around 2.0%.Economic factors such as the tightening of credit conditions and heightened trade tensions are also driving the deceleration in growth.Japan’s economy is expected to expand by 0.8% in 2018, with this rate increasing only slightly in 2019 to 0.9%.

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