What is the Condition of the Global Economy?
While the British and the US economies appear to be in good shape and making important strides such as their central banks raising interest rates, the rest of the world’s key players seem to be struggling. From Europe to Asia, there continue to be challenges affecting various aspects of the economy including the stock market and asset purchasing programs.
China and Japan
Years since the major financial crisis that affected the globe, it is apparent that there are fresh concerns regarding the world economy. Bouncing back from the brutal recession has not been an easy undertaking and the economy has witnessed slow recovery. British and American economies provide positive news but China and Japan are grappling with slow economies.
Japan has to contend with a sluggish economy as it attempts to ease its asset purchasing agenda. China is relying on the central bank to finance the its most prominent lender as it battles the stock market crisis and tries to overcome slow economic growth. In Western Africa, the Ebola outbreak has had major financial implications within the continent and beyond.
The most conspicuous economic struggle that continues to spread anxiety is in the Euro zone. The growth of the German economy has experienced several setbacks and the prospect of another recession in the Euro zone has led to numerous efforts made to salvage the euro.
The president of the continent’s central bank has emphasized the need to do all that is possible to make sure that the currency survives. In the midst of such declarations, France and Italy have been determined to avoid reforms that aim at restructuring while Germany has focused on austerity measures.
Considering the importance of continental Europe in regards to its contribution to the global economy, its stagnation would have a devastating effect on the world’s productivity. Greece has been among the main areas of focus owing to its massive debt burden that has caused panic among investors and resulted in growing concerns about how possible it will be for the euro to be sustained in the long run.
The challenges that the region’s economy faces makes it necessary for central banks to have flexible financial systems and monetary policies. Europe’s economy has had adverse effects rising from sluggish markets and massive debt.
Inclusion of Emerging Economies
National currency stability is vital for any economy to thrive. A fluctuating currency affects the economy and ability to compete effectively on an international scale, which inevitably impacts labor markets. Emerging economies such as India, Brazil and South Africa are essential for global economic growth and their role needs strength–hening.
Reality of Deflation
Although inflation is typically dreaded, the reality is that deflation can have even more dire consequences. As prices start falling, spending subsequently stops, demand reduces and more loans remain unpaid. This is why the inability to meet targets of inflation as outlined by European central banks can rapidly weaken the economy.
The spotlight is certainly on the euro zone and taking of firm steps will be necessary before the euro’s possible demise. Time is of the essence and quick action is required to ensure that the European and overall world economy is kept on track.