POINT IAS

World Economy

Important Excerpts from The Hindu:

  • Global economy is witnessing “synchronised slowdown” which will result in slower growth for 90% of the world this year, in contrast to two years ago when nearly 75% of the world witnessed accelerated growth.
  • In July, the IMF cut its FY 2020 growth forecast for the Indian economy by 30 basis points to 7%.
  • Widespread deceleration meant that growth this year would fall to its lowest rate since the beginning of the decade.
  • There is a need for using monetary policy wisely and enhancing financial stability.
  • Slowing growth was blamed on various factors including the trade war between the United States and China, which is expected to shave off 0.8% from global GDP by 2020.
  • Another cause is prolonged period of extremely loose monetary policy to sustain global growth.
  • The global economy has been helped by a whole decade of historically low interest rates, yet the recovery that ensued after the global financial crisis was the slowest in history and seems to be in trouble already. Even worse, this time around, as the global economy slows, interest rates are near or below zero in much of the developed world and corporations and governments are burdened with unsustainable amounts of debt. There are risks posed by the sudden reversal of capital flows and high global debt, however, there is a need for more monetary and fiscal policy actions.
  • There is a need for structural reforms to boost growth, particularly in the emerging market economies. The “World Economic Outlook” report which estimates that the right structural reforms can double the speed at which emerging market economies such as India can catch up with the living standards of people in advanced countries by raising their productivity.
  • “Everyone loses” in a trade war and synchronised global policy action can help everyone.

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