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8/3/2019 An Unbalanced Recovery
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By
Dinesh Sundaram
Keerthi Sagar
Prabhu
Prithviraj
SindhuV.Vaikunth
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Topic Slide no.
Recession 3
Introduction 5
GDP Growth 7
Elements of concern 10
Growth rate in 2010 12
Govt.s debt burden 13
Three speeds 19
Dark clouds 21
Twin dangers 23
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A Recession is a contraction phase of the business
cycle.
National Bureau of Economic Research (NBER) is theofficial agency in charge of declaring that the economy
is in a state of recession.
An economy typically expands for 6-10 years and tendsto go into a recession for about 6 months to 2 years
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The Business Cycle Dating Committee of The National
Bureau of Economic Research in U.S. had dated the
recession induced by financial crisis to December 2007.
The recession, estimated to have lasted 18 months
without signs of robust recovery.
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To overcome recession:
Governments expanded expenditures.
Central banks pumped in liquidity to save
the financial system and restore demand.
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Taking the world as a whole:
2006 -> More than 5%
2007 -> Dipped to 2.8%
2008 & 2009 -> -0.6% 2010 -> Recovered to 4.8%.
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-6
-4
-2
0
24
6
8
10
12
14
2006
2007
2008
2009
2010
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Speed and nature of recovery.
In spite of positive growth, job losses were not being
fully recovered and the unemployment rate remainedhigh.
In 2010, the unemployment rate touched 10% in U.S.
and France.
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Growth was extremely unevenly distributed across
regions and nations.
Recovery appear to be largely restricted to a few
emerging market countries.
Inflation is high in countries where the growth rate is
higher when compared to other countries.
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0
1
2
3
4
56
7
8
9
10
2006 2007 2008 2009 2010
World
G7
Newly industrialized
Asian economies
Excluding G7 and
Euro union
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Developing countries -> 7.1%
G7 countries -> 2.5%
European union -> 1.7%
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Subprime mortgage crisis (home loan
defaults).
Increased debt on the balance sheets of the
government in the developed countries like
U.S.
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Increase the reticence of govt. to substitute
public for private expenditure as the stimulus
to growth.
Unevenness in growth which was earlier seen
as a sign of global imbalance, is now being
celebrated as a cause for optimism.
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Three speeds at which the recovery is expected to
proceed during 2011:
6% or more in the emerging economies led
by China and India. 3% growth in U.S.
Less than 2% growth in European union.
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Factors affecting balanced recovery are:
When growth is there, unemployment shouldalso get reduced.
Lack of confidence due to cheap liquidity
into the system.
Recovery generated by developments such
as the sovereign debt problems in Europe is partly
responsible.
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Those emerging markets recording the highest rates of
growth are experiencing symptoms of overheating in
the form of inflation in goods and/or asset prices
In China, inflation stood at 5.1% in 2010 when the
growth rate crossed 10%.
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Housing prices also rose to 7.8%.
In India the growth has been accompanied withinflation.
In addition, across emerging markets, the inflow of
foreign capital fuelled by the availability of cheap
credit in the developed countries is resulting in
currency appreciation that undermines export
competitiveness and hurts growth.
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Recovery to be financed with debt that makesit vulnerable.
The growth in U.S. consumer spending mightencourage emerging markets to return torelying on export led growth.
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www.wikipedia.com www.tradingeconomics.com
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http://www.wikipedia.com/http://www.tradingeconomics.com/http://www.tradingeconomics.com/http://www.wikipedia.com/8/3/2019 An Unbalanced Recovery
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