Economic Slowdown Current Affairs - 2019

Category Wise PDF Compilations available at This Link

IMF: World Economic Outlook, 2019

The World Economic Outlook is a biennial report that is released in April and October. According the report released recently on October 15, 2019, the global economy is at its slowest pace of growth at 3%. This is a serious climb down from 3.8% in 2017.

Key highlights of the report

  • The Global growth rate is projected to improve to 3.4% by 2020.
  • The growth of advanced economies is projected to slow down by 1.7%
  • The emerging and developing economies are projected to experience a growth pick up from 3.9% in 2019 to 4.6% in 2020.
  • The report downgraded India’s growth projections to 6.1% in 2019 and 7% in 2020.
  • According to the report, China is projected to grow at 6.1% in 2019 and 5.8% in 2020.
  • The trade volume reached the lowest since 2012. It reduced by 1% since 2012.

Justifications

  • About half of the economic slow down comes from shallower recessions in stressed emerging markets like Argentina, Turkey, Iran
  • Higher tariffs and prolonged uncertainty in the trade policy are the major reasons for dented investment and the slowdown in the growth. This is very well seen in the effects of trade wars and imposed sanctions
  • The automobile industry is contracting mainly due to the disruptions from new standard emission standards. This predominantly has effect in China.
  • Trade barriers and geopolitical tensions like Brexit is hampering investment, confidence and growth

Recommendations

  • The countries should support the economy slow down with tax-base enhancing measures, rationalizing subsidy-spending, efficient credit allocation and governance of public sector banks.
  • India should keep its Fiscal Deficit under check

World Bank: South Asia Economic Focus, 2019

The World Bank recently released its South Asia Economic Focus, 2019. The report says that Bangladesh and Nepal are growing faster than India. However, it assured that India is still a fast-growing economy. India is relatively hit hard by the recent global economic slowdown.

The report is titled “Exports Wanted” highlighting the export potential of the South Asian region being not used to the fullest.

Key findings of the report: India

  • The projected growth of India in 2019 according to the report is 6%. However, India is expected to recover gradually. The report said that the growth rate of India will reach 6.9% in 2021 and 7.2% in 2022.
    • In 2016-17, the growth rate of India was 8.2%
    • In 2017-18, the growth rate was 7.2%
    • In 2018-19, the growth rate was 6.8%
  • The domestic demand (the major driver of growth rate in India according to the report) of the India has slipped. The private consumption is growing at the rate of 3.1%. It was 7.3% last year
  • The manufacturing growth dropped to below 1% in the second quarter as compared to 10% last year. The reason for the drop down is mainly due to the global slowdown in their investments
  • The industrial output growth increased to 6.9% due to increase in construction and manufacturing activities
  • The growth in agricultural sector and service sector was 2.9% and 7.5% respectively
  • The Current Account Deficit of India widened from 1.8% in last year to 2.1% this year
  • 80% of the causes of the economic slowdown is coming from international causes.

Key findings of the report : South Asia

  • South Asia remains the fastest growing region in the world, despite of the report’s estimation of growth in South Asia to fall to 5.(% in 2019.
  • The exports growth of South Asia accelerates and import growth is slowing. The growth of imports has declined by 15 to 20% in the region. Under these circumstances the GDP growth is expected to accelerate
  • South Asian countries are exporting only a third of their potential
  • The growth rate of South Asia was 7.7% in 2016, 7.2% in 2017 and 6.9% in 2018
  • Among all the countries India and Sri Lanka showed the lowest growth rates
  • Foreign Exchange reserves declined in South Asian region
  • Food inflation decelerated in the region. It was stable around 3%. The prices fell mainly due to good harvests.

Key findings of the report: Country wise growth rates

  • In Nepal, the GDP growth is projected to be 6.5%. The growth will be backed by construction activities, tourist arrivals and higher public spending
  • In Afghanistan the growth is expected to reach 3%. It will be mainly due to improved farming conditions and assuming political stability after elections
  • In Sri Lanka the growth is expected to soften to 2.7% in 2019. IF supported by recovering investment and exports, political uncertainty dissipated and tackling security challenges the growth is projected to reach 3.3% in 2020

Key Findings of the report: Trade Policy changes affecting South Asia

  • Import tariffs to protect domestic industries
  • Trade tensions between India and US
    • US imposed tariffs in steel and Aluminum imported from India. India in response to the move, postponed the retaliatory tariffs on selected US products like chickpeas, walnuts, Artemis, lentils, etc.
    • India had benefited greatly under the GSP – Generalized System of Preferences that gave 2,00 products duty free access to the US. Around 5.7 billion USD worth goods were covered under GSP in 2017. In 2019, the US withdrew its GSP following the market access strategy to open India’s market for US products.
  • India – Pakistan trade tensions
    • The MFN – Most Favored Nation status was withdrawn after the Pulwama attack. The custom duties on all goods imported from Pakistan was raised to 200%. It is expected that Pakistan will retaliate imposing tariffs on Indian goods.
  • Trade war between China and USA
    • The garment industry of Bangladesh has benefited immensely from the ongoing trade tensions between China and USA.