(Q.24)THE WORLD IS RECOVERING BUT SOME COUNTRIES MORE SLOWLY THAN OTHERS

INTRODUCTION:-

As we all know that due to recession, the growth of the countries has been affected but some countries have managed to grow faster than others. Countries like Japan, North America, Northern Europe had a half speed recovery, with growth but slow progress in returning to normal. In Asia, growth of the countries slowed during recession but the economies are returning to normal quickly. In Latin America, Africa and Middle East, less effect of recession has been seen.

The panic in financial markets created this problem. Financial markets froze with the failures of Fannie Mac, Freddie Mac, Lehman brothers and specially AIG in September 2008.By March 2009, financial market started to function again, and the recession was coming to an end in the developed countries but with a slow growth. The recovery of certain countries has been discussed as under:-

DISCUSSION:-

a) Countries whose growth has been slow:-

i) North America:-Slow growth has been witnessed in US.A sharp drop in the unemployment rate has been seen i.e., from 0.8% to 9.0%.However, increase in employment has occurred but at a slow rate. Slow growth has been seen due to tighter fiscal policy. Canada was less affected as compared to US. Most of the Canadian workers have found jobs who lost them during recession. Canadian labour force is increasing as compared to the number of jobs available there. The country’s unemployment rate (7.8%) is still well above pre-recession lows (5.9%).

ii) Europe:-The financial problem initially started in US but later gradually European countries started facing the same. The European Union and European Central bank could not do much to deal with it because of national political issues. The exports became uncompetitive within Europe due to inflation in Southern European Nations. The recovery rate of most European countries including France and non-Euro countries (such as UK) is in the middle.

iii) Japan:-Japan is one of the worst sufferers of the financial crisis among the developed countries but on the contrary it has recovered more quickly because of its exports to China. Another reason for slow growth of Japan is the trouble that it faced due to recent earthquakes, tsunami and nuclear accidents. It is difficult for Japan to increase exports because of a stronger Yen and weak growth in US.

b) Countries whose growth has been fast:-

i)Asia Pacific:-China’s strong growth has helped other Asian countries including commodity producers such as Australia and capital goods exporters in Japan and South Korea. India’s economy is expanding only slightly more slowly, boosted by strong domestic demand and rapid growth in services exports. In both countries, rising food prices are causing both economic and political problems. South Korea has benefitted from manufactured goods exports to China, particularly of capital equipments. Most of the South East Asian countries are also showing solid growth as China gradually becomes the locomotive for the region.

ii) Latin America and Africa:- China has become the fastest growing market for most of these countries, though the U.S. remains the largest. Mexico's growth will trail that of most of the other Latin American countries, because of its greater dependence on the U.S. market, but we still expect its growth to be fairly solid. The growth of the Caribbean countries will be slow because of its dependence on tourism from US and Europe. Africa similarly depends on commodity exports, and prices remain firm. China is becoming more important both as a customer and as an investor in these markets.

iii)Middle East and North Africa:-Arab countries are getting benefitted because of the high oil prices but the political situation adds to risks. All the non-oil producing countries depend on these countries for fulfilling the demand of oil.

CONCLUSION:-To conclude we can say that all the countries became a victim of the financial crisis. All the countries suffered, some countries more than the others like Japan and hence took time to recover accordingly and some countries managed to sail through the crisis like the oil producing countries.

References-www.standardandpoors.com

Submitted to: Mr. Gurdeepak Singh

Submitted by: Ghata Thakral

(MBA 1^st Semester)

(Section A)