An Unbalanced Recovery

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/


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An Unbalanced Recovery