Friday, January 25, 2013

economic recession



Over a period, global development has been hindered by the emergence of recession that has resulted in the reduction of economic growth. Because of the financial crisis experienced recently, the global market has been adversely affected with the reduction in the commodities being traded. Other countries have also reduced their participation by withdrawing from the participation. In addition, the financial crisis has led to the disparities in the foreign exchange. Foreign exchange is a vital element in foreign trade because trade in the global market involves the use of various currencies from different nations of the world. In circumstances where the exchange rates are unstable, trading is influenced because profit margin cannot be ascertained and losses are unavoidable. The emergence of economic recession is a significant topic that economists from all over the world have tried to initiate its control measures. Economic recession has adverse effects that are felt in respective economies like reduction in the living standards, rise in unemployment rates, fall in the economy GDP, the emergence of informal settlements in the urban centers and reduction of investment rates. With all these effects of economic recession, economic association of the world economists and the World Bank has initiated control measures that will be used to eradicate recession in the future. It has been established that the effects of economic recession were largely felt with the developing economies more than the developed economies. Developing economies are more dependent of the developed economies for their sustenance. Therefore, reduction for aid accorded to the developing economies is significantly translated to reduction in the performance of the economy. However, developed economies have control measures and adequate assets to enable them survive the dangers of economic recession. Economists have argued economic development takes the form of depressions and peaks. Peak season is attributed to the period when the economic performance is high and all economic agents are functionally. Similarly, depression is the period characterized by poor performance of economic agents and low economic growth.
With the emergence of economic recession, economists from all over the world have suggested contradicting views towards economic correction. There is a group of economist believing the emergence of economic recession is a normal process in attaining development. In this regard, they suggest that no corrective measure should be taken because the economy will correct itself. They suggest that economic growth will follow the period of economic development. on the contrary, there is  also a group of economists believing that the emergence of economic recession is a sign of malfunction in the economic agents. They claim that the problems leading to the emergence of the recession must be established and corrective measures implemented. In this regard, some economists in this group have suggested that the emerging recession was because of the fluctuations in oil prices.
Evidence of economic recession
For a period, economic planners of various nations have established increasing difficulties in implementing economic policies. Because of this, the economies have continued to experience poor performance characterized with the slow or no growth of the overall economy. All these disparities are attributed to the emergence of recession. There are significant consequences of global economic recession experienced by all the economies of the world. Some of the consequences have been discussed on various forums with the view of establishing corrective measures.
Rising unemployment rates
Unemployment rate is an extremely vital indicator of economic performance. Economies with low unemployment rates suggest that the economic agents are functioning well and majority of the citizens are employed. When majority of the citizens are employed, the GDP of the economy is increased and the economic growth is also enhanced. Employment is important because it increases the populations’ disposable income and increases investments in the nation. The returns to investments are the economic growth stimulator that spurs economic growth. When the unemployment rate is rising, it suggests that the economic agents are not functioning and the GDP, investment and economic growth are below par. Concerns have been raised regarding the significant increase in the unemployment rates that currently stands at 9.7 per cent. This increase is alarming because it represents a large number of the population that is not able to influence the development of the economy. Instead, the unemployed citizens are a cost to the government because they have to be taken care of. Following the recession experienced by the US economy in 2001, the trading partners were adversely affected and the impacts were felt until 2005 when recovery plans were initiated to correct economic malfunctions. The corrections of economic growth were successful in other development sectors but unemployment rates remained high.
Slowdown of economic growth
The occurrence of economic recession is extremely harmful to the development of the economy because it has adverse effects on consumer savings, investment and development. the shocks of reccession are largely being felt by the citizens with rael wages