ISLAMABAD, 25 February 2020 — Mudasser Chudhary:
The Global Economic Themes report was jointly published by ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants). The report examines three of the longer-term structural issues that are affecting the global economy as well as the global economic impact of the US-China trade tensions. The three issues are:
• The Euro – fiscal integration needed
The Euro has survived its first two decades, despite several financial crises that threatened its very existence. But it has not been a success – it has failed to deliver the real economic convergence among its members claimed for it at the outset.Limited progress so far has come following financial crises – a prime candidate for the next eurozone crisis is Italy, where public sector debt is very high and the banking system increasingly fragile.
• China – becoming rich before it becomes old?
China has great advantages, including a modern infrastructure, a large domestic market that allows firms to exploit economies of scale and an advanced digital economy. But due to High levels of debt, especially among State Owned Enterprises, are now limiting the ability of the authorities to stimulate growth through lower interest rates. In addition, the population of working age is now declining as the population as a whole ages. This will both reduce the trend rate of GDP growth and increase the dependency ratio – fewer workers in relation to an increasing number of older people.
• The USA – public debt challenges
The U.S. economy has now expanded continuously for over 10 years, the longest such period in over 150 years. But there are structural changes that represent challenges for policymakers. The U.S. can operate at lower levels of unemployment without generating upward pressure on inflation. Finally, the resurgence of the oil industry and the emergence of the U.S. But,now a lot of investment and spending is tied into the oil market therefore this could increase volatility in the oil sector.
Michael Taylor, Chief Economist at ACCA said: ‘The articles in the Global Economic Themes report look at economic issues that are likely to have an impact over the longer term.
‘Through much of last year, US-China trade tensions increased which undermined business confidence and investment as well as contributing to a sharp slowdown in global trade. A recent improvement in trade relations resulted in a ‘Phase One’ trade deal which included a modest reduction in some tariffs.’
Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, said, ‘We saw confidence in the U.S. tread low throughout the year before. The economy continues to expand, and fears of a recession have quelled with continued consumer spending and rising wages. With 2020 being a U.S. presidential election year, confidence should continue to move upward.’