Essay Example Reviewing the Articles on Economics

Published: 2022-05-31
Essay Example Reviewing the Articles on Economics
Type of paper:  Article review
Categories:  Economics
Pages: 4
Wordcount: 1048 words
9 min read

The first article titled '10 economic shocks to look out for in 2017', highlights the 10 risks which are likely to face the global economy. First of all, the article projects that the U.S. economy will grow faster. The energy sector is one of the most likely industries to experience growth which will also be backed up by tax cuts and infrastructure. The growth in the U.S. economy will be depicted by an increase in the Gross Domestic Product (GDP). In Europe, the economic growth is expected to slow down because of political uncertainties in the upcoming elections in several countries and Brexit. Brexit has the biggest economic impact because it will lower the level of exports and imports in the UK which will also affect all the other European nations. In Japan, the economic growth is expected to increase because of a weaker yen which will help increase the country's exports and move the economy out of deflation. In China, the country is likely to experience a slow economic growth which will mainly be due to a slowdown in the housing sector. The demand for higher wages and better working conditions has increased the input prices in China reducing the production and slowing the economy.

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The emerging markets are expected to experience a growth in the economy because of rising commodity prices and global expansions. The rising commodity prices in developing economies will lead to commodity demand growth and the emerging markets economies will grow. The prices of commodities are expected to increase because of an increase in demand and an increase in the supply barriers. Most parts of the world will have an increase in inflation because the U.S. is experiencing a lot of inflation and the dollar is currently very strong which will affect a lot of countries. Those countries that will be affected are the ones that trade using the U.S. dollar. The interest rates in the United States are expected to increase because inflation and the U.S. economic growth will trigger the interest rates. The fiscal policies in the United States economy will be used to determine the appropriate level of spending and taxes and the monetary policies will be used to manage the supply of money.

After the U.S. elections, the U.S. dollar is expected to rise even more. The risk of the global markets facing recession in 2017 is very low even with an increase in uncertainty.

The second article is titled 'The RBA is increasingly worried about the impact of China's debt levels on the global economy.' In this article, the Reserve Bank of Australia (RBA) is worried about the financial stability risks in China due to their increasing debt level. Reports show that the debt in China is three times more than economies with similar per capita incomes. One of the main worries of the RBA is because much of China's debt has been funded through unregulated channels. The RBA is afraid that this growth in debt will raise the risk of financial shock in future. They are well aware that if China faces any financial shock they will also be substantially affected together will all the other countries with strong trade links to China. In future, China's policymakers will have a hard time trying to regulate these risks without slowing down and disrupting the economic activities. If they choose to use more strict regulations to reduce the growing debt levels then this is likely to result in a sharp decline in economic activity. According to the RBA the more, the risk lending grows then China is very likely to encounter a major financial disruption during this economic transition. The International Monetary Fund (IMF) also warns that China's debt levels are very dangerous because it is likely to cause a marked growth slowdown or disruptive adjustment in future. According to the IMF, the past scenarios of such credit growth have not brought about any positive results. The Bank of International Settlements (BIS) has also warned against the risks of a financial crisis because of the sudden rise in China's debt. If China manages to evade all these risks pointed out by the RBA, BIS and IMF they will make history.

The third article discusses how Australia's economy is built on shaky foundations. The article states that Australia's economy has been growing because of sheer luck which is mostly due to the abundance of their natural resources which are in high demand in China. The article states that Australia is the most dependent country on China among all the OECD nations and more than a third of their exports go to China. At the start of 2016, the Chinese believed that there would be a demand for materials used in construction. Steel which is made from iron core makes up one of Australia's main exports and has largely promoted the country's GDP growth and trade surplus. Australia exports 29% of the global core in the world, and China consumes about 81% of this iron ore. However, in 2017 the demand for iron ore in China dropped because of the crisis facing their property sector. This spells doom for the iron ore because its price has been falling for the last six years.

Coal makes up Australia's second biggest export and the country is the leading exporter in the world with about 38% of the global demand. The main markets for Australia's coal export are China and Japan which are projecting a decrease in their dependency on coal by the year 2040. The demand in China has dropped three years in a row in 2017 as many coal-fired plants were closed down. In Japan, the demand has also dropped because of the termination of operations in the nuclear reactors which use up most of the coal exports.

Australia is having a hard time in their mining industry because their revenue is dropping largely while the operating costs continue to increase. The Australian economy is currently surviving on the longest running property bubble in history. However, they cannot rely on this property bubble which has thrived because of selling overpriced houses to foreigners. The country cannot rely on this property in future and the economy is lacking exports and future-proof industries. Therefore, they should be prepared for worse economic times unless they transform.

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