By Dr B K Mukhopadhyay
Current trends indicate that the global economic recovery continues, albeit unevenly, in as much as while growth is a bit rapid in many emerging economies (BRICS), it still remains fragile in most advanced economies. In fact the global economy continues to improve amidst ongoing policy support and improving fincial market conditions. As the latest trends indicate, world trade continues to pick up gradually, and in many developing regions the trade volume has returned to the pre-crisis levels owing to the robust growth in some large developing economies, mainly India and Chi, and the restocking of inventories.
As of now the very question that has been revolving is related to the facts and circumstances in the developing world? The question of undermining has been steadily going down – immense potentials, least exploration – the future lies here indeed, provided there is optimum utilization of the vast largely untapped resources!
Examples are not far to seek.
DRC [Democratic Republic of Congo] is one of the richest countries in the world in terms of tural and mineral resources. The land is so fertile that it could have been one of the world’s largest exporters of fruit and vegetables (an area where at the moment it is one of the largest importers). Somewhere between 50-70 percent of the population doesn’t have enough food to eat / malnourished. In terms of mineral wealth, in some parts of the country, it is rich. It has water in abundance, yet the majority of the population has no access to safe, clean drinking water!!
BRICS, coined by US investment bank Goldman Sachs to describe the five key emerging economic powers, has been predicted to account for an increasingly greater share of the world economy, which accounts for around 22 per cent of the global economy, compared to 16 per cent a decade back. Though Russia (the world’s largest gas and oil producer) fell into its worst recession even in the very recent past, yet the economy is expected to grow, mainly by a bit rebound of oil prices. While dollar-denomited assets were held heavily by Chi with the US Treasury, Brazil, with the ability to become a major player tomorrow in the world economy after locating huge deep sea oil reserves, and which slipped into recession a couple of years back, rebounded and grew thereafter. India is expected to grow by almost 8 per cent this year backed by consumer and government spending.
So, it is not an exaggeration to say that the developing economies hold the fort under the stated facts and circumstances.
It has rightly been noted that successful implementation and persistent application of policies aimed at improving exterl liquidity, including further monetary tightening if required, would support the ratings. Concerted efforts to persist with fiscal consolidation, by both enhancing the tax revenue base and ratiolizing expenditure, in tandem with lowering public debt, would be supportive of economies like Sri Lanka, Vietm, South Korea, Bangladesh, among others. It has been a fact that in the near-term, certain policy measures have resulted in adverse risks to both growth and inflation that have the potential to impact policy consistency. Due to the authorities’ pro-growth bias and the fragile balance of payments, Fitch believes developments in the coming months warrant close monitoring. The overall position cannot be said to be highly satisfactory, but silver lining must not be lost sight of.
It is of course heartening to locate that economies like Bangladesh, Vietm, among others, are also steadily coming up.
Further simplification of the tax system and attraction of greater foreign direct investment inflows could bolster measures. Measures implemented by the Central Banks in economies like Sri Lanka and the governments’ tightened monetary conditions, could help return to a more sustaible GDP growth trajectory over the long-term.
Side by side, let us look at the matter from another are. The latest trend has been that new fincial plumbing are in the making. London and New York are not about to lose their spots as the world’s leading centres, and they are being increasingly challenged by emerging market upstarts in a potentially lucrative area – magement of fund being cut well away from the traditiol centres. If the recent trends are any indication, spur of growth of fincial centres in the fastest-growing economies would be there in view of prominent factors like rising trade between emerging economies, cross-border mergers, and acquisition by Indian and Chinese companies as well as move by developing world businesses to raise capital in each other’s markets.
Capital is much more efficiently deployed in comparatively less risky emerging markets where the returns are higher.
The intra-emerging markets movements of funds are quite evident – flows between Africa and India, India and Chi, and India and South Korea have been on the rise. The ongoing fact remains that with developed economies, minnows have been struggling to keep their heads above water, and with emerging markets thriving, more and more fincial deals are being cut away from the traditiol centres. Singapore is challenging Switzerland for the world’s wealth magement business, while Hong Kong, which led the world in IPOs in the recent past, has been an upcoming centres as an equity hub for Asia’s growing resources companies and Shanghai is coorditing the fincial resources driving Chi’s private sector.
At the global level, these are being considered as seeds of a new model, being the one in which the savings of emerging markets flow to the areas showing highest growth rates and not to the US and Europe. Indian, Chinese investments have been steadily surging in Africa and SE Asia.
In fact, the foundations for a worldwide recovery are not solid as the sovereign-debt crisis would deepen. Euro zone remains shaky because of weak Greece, Spain, Hungary and Portugal. No wonder, the global economy risks are sliding back to contraction. Most central banks know that they will at some point have to exit from the accommodative monetary policy. Though a lot is said about this, action has been rare in view of the fragile global recovery. Any major change in interest rate is not discernible till stable recovery. Present day magement pundits call for mainly two things – speed and stability!
It is also good to note that tions are becoming increasingly conscious about the climate changes. Climate change playing a role in growing list of species at risk. The European Union will provide 800 million euros ($891 million US) to help 79 African, Pacific and Caribbean tions implement a global deal to combat climate change. Though the EU will provide 3 million euros to support Fiji, which will oversee United tions negotiations in 2018, yet It did not detail how the rest of the money would be spent.
Also, the U.S. affirms commitment to Arctic climate change research. Again, the EU support comes in considering whether to carry out a campaign threat to quit the landmark Paris Agreement, which agreed in 2015 to shift the economy away from fossil fuels. Yes, the Paris Agreement is rightly described as “irreversible and non-negotiable” as almost 200 tions attend UN talks in Bonn on a detailed “rule book” for the deal. The very task is for both of the developed and developing countries together, to defend the Paris Agreement.
(The Writer, a noted Magement Economist, an intertiol Commentator on Business and Economic Affairs and Principal, Eminent College of Magement and Technology, can be reached email@example.com)