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
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