Mon, 27-Jun-2022
Tuesday 10 Dec 2019 , 11:40 am

Here’s How the Top Three Global Issues are Holding Back the Economy

Phase one trade deal between US and China, Brexit, Hong Kong Protest, geographical tensions, and political controversies are some of the major reasons that are affecting the global economy. In 2019, market has seen constant economic slowdown, but the question remains, will the economy rise in 2020?
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United Nation published its flagship report on Trade and Development in September 2019. The report mentions, “There is a real possibility of further setbacks for many countries. In some, already close to or in recession, economic and political uncertainties are compounding existing fragilities.” U.S.-China trade deal, Hong Kong Protest, and Brexit are the three major reasons for the downfall of global economy.

The phase one trade deal between two largest economies, US and China is yet to happen. Officials on both sides are still negotiating and this uncertainty and daily discussions on the deal are affecting almost every sector. In US, GDP growth rate for third quarter dropped to 1.9%. Majorly manufacturing industry is facing challenges as the demand for American products have decreased. Not just manufacturing but biggest areas including Agriculture, Technology and automotive etc. are also struggling.

China is also facing economic slowdown and not only because of Trade deal but also Hong Kong Protests. International companies in China are trying to relocate to avoid American tariffs. Recently, Panasonic reported 10% drop in its profit of second quarter. Last month, Hong Kong Airlines failed to pay November month’s salary to half of their employees. “Hong Kong Airlines’ business has been severely affected by the social unrest and a sustained weak travel demand,” the memo said. “With November being a low travel season as well, our revenue has reduced significantly, affecting our payroll for the month.”

After Hong Kong Airlines, Hong Kong’s flagship airline Cathay Pacific also announced in its memo that downsize its capacity by 1.4% in 2020. Experts also predicted that the economic condition in china is about to damage as there are lay off of staffs from many sectors including automotive, food, hospitality, retail. To avoid the crisis, Chinese small manufacturers started to export their products to African market and according to experts, China will import Brazilian and Argentinian beans, instead of the U.S., if the deal delays.

After the discussions began about Brexit in 2016, Britain’s manufacturing industry is hurt because of the concerns regarding supply chain of the products. Last month, a survey showed that British manufactures cut off the jobs at the highest rate because of political uncertainties, global slowdown and Brexit. According to a survey report released this week, British manufacturers cut jobs last month at the fastest rate since 2012, as pressures from Brexit and a global trade slowdown caused the sector’s longest decline since the financial crisis.

The ill-effects of the uncertainties and protests have had ripple effects on other nations too. For example, in Japan, product orders including non-ferrous metals and transport machinery dropped by 5.2%. In India, the July-September quarter recorded as six-year low economic growth at 4.5%. Also, with the rising inflations uncertainties of stagflation have risen.

Indian economist, Raghuram Rajan in his recently published article wrote, "The starting point has to be to recognize the magnitude of the problem, to not brand every internal or external critic as politically-motivated, and to stop believing that the problem is temporary and that suppressing bad news and inconvenient surveys will make it go away," he said.

Interestingly, the Department of Labor reported that approximately 2.7 lac jobs were added in the US economy in November, decreasing unemployment rate by 3.5%. Considering all this contradictory situation, many experts predict, there will be recession in 2020 but some are certain that the economy will rise in middle of 2020.

Neha Mule

Neha writes articles on sectors including medicine, food, materials, and science & technology. A qualified statistician, she has the ability to observe and analyze the trends in global markets and write compelling articles that help CXOs in decision making. She is a bookworm and loves to read fiction, lifestyle, science and technology. Neha comes with 6 years of experience in content writing and editing that involves blog writing, preparation of study materials and OERs.

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