# data[].attributes.headline
Macroeconomics is a discipline of economics that investigates how an entire economy-the market or other large-scale systems-functions. Inflations, price levels, the pace of economic growth, national income, gross domestic product (GDP), and variations in unemployment are all studied in macroeconomics. Macroeconomics addresses several important problems, including What causes unemployment? What causes price increases? What causes or promotes economic development? Macroeconomics tries to figure out how well an economy is doing, what forces are driving it, and how performance might be improved.

# data[].attributes.subject
Macroeconomics is a discipline of economics that investigates how an entire economy-the market or other large-scale systems-functions. Inflations, price levels, the pace of economic growth, national income, gross domestic product (GDP), and variations in unemployment are all studied in macroeconomics. Macroeconomics addresses several important problems, including What causes unemployment? What causes price increases? What causes or promotes economic development? Macroeconomics tries to figure out how well an economy is doing, what forces are driving it, and how performance might be improved.

# data[].attributes.headline
Following a period of recovery following the 2014 Gaza conflict, growth in the Palestinian territories fell to 0.7 percent in the first quarter of 2017, as restoration efforts halted and private consumption declined. Unemployment is stubbornly high at 29 percent. Given the persistent challenges to economic competitiveness, medium-term growth is expected to be about 3%. Growth and employment are in danger due to lower-than-expected aid and the likelihood of prolonged violence. The most recent battle in Gaza had devastating social and economic implications, leading to a recession in the Palestinian economy in 2014. From 2015 until 2016, reconstruction efforts enabled growth to return to an annual average of 3.4%. However, aid for reconstruction has decreased dramatically in 2017, resulting in a severe slowdown in reconstruction work. This, combined with a drop in private consumption in the West Bank as a result of political tensions, lowered real GDP growth to 0.7 percent in the first quarter of this year. The unemployment rate in the Palestinian territory remains stubbornly high at 29%. Unemployment in Gaza is more than twice as high as in the West Bank, at 44% more than 60% of Gazans aged 15 to 29 are unemployed. Below are the statistics on the unemployment in Palestine: 

# data[].attributes.subject
Following a period of recovery following the 2014 Gaza conflict, growth in the Palestinian territories fell to 0.7 percent in the first quarter of 2017, as restoration efforts halted and private consumption declined. Unemployment is stubbornly high at 29 percent. Given the persistent challenges to economic competitiveness, medium-term growth is expected to be about 3%. Growth and employment are in danger due to lower-than-expected aid and the likelihood of prolonged violence. The most recent battle in Gaza had devastating social and economic implications, leading to a recession in the Palestinian economy in 2014. From 2015 until 2016, reconstruction efforts enabled growth to return to an annual average of 3.4%. However, aid for reconstruction has decreased dramatically in 2017, resulting in a severe slowdown in reconstruction work. This, combined with a drop in private consumption in the West Bank as a result of political tensions, lowered real GDP growth to 0.7 percent in the first quarter of this year. The unemployment rate in the Palestinian territory remains stubbornly high at 29%. Unemployment in Gaza is more than twice as high as in the West Bank, at 44% more than 60% of Gazans aged 15 to 29 are unemployed. Below are the statistics on the unemployment in Palestine: 

# data[].attributes.headline
 Employability will fluctuate depending on economic conditions, with certain exceptions in occupations that are less affected by economic swings, such as healthcare, education, and defense. It applies to nearly everyone in the labor force, as the ability to find, keep, and switch jobs throughout time is critical to one's survival and success. A lack of employability lowers labor force productivity and contributes to frictional and structural unemployment. As a result, a country's standard of living, as measured by GDP per capita, and economic growth potential, as measured by aggregate demand and GDP, are affected. Consumer spending is the factor that has the most influence on GDP and economic growth. Businesses do not invest in capital and personnel, nor do they endeavor to expand to fulfill customer demand, if consumers are not spending on goods and services. This leads to a slowing economy and rising unemployment, which are the precursors of a recession. Below are the statistic between economic growth and unemployment: 

# data[].attributes.subject
 Employability will fluctuate depending on economic conditions, with certain exceptions in occupations that are less affected by economic swings, such as healthcare, education, and defense. It applies to nearly everyone in the labor force, as the ability to find, keep, and switch jobs throughout time is critical to one's survival and success. A lack of employability lowers labor force productivity and contributes to frictional and structural unemployment. As a result, a country's standard of living, as measured by GDP per capita, and economic growth potential, as measured by aggregate demand and GDP, are affected. Consumer spending is the factor that has the most influence on GDP and economic growth. Businesses do not invest in capital and personnel, nor do they endeavor to expand to fulfill customer demand, if consumers are not spending on goods and services. This leads to a slowing economy and rising unemployment, which are the precursors of a recession. Below are the statistic between economic growth and unemployment: 

# data[].attributes.body
Recommendation

# data[].attributes.headline
In 2018, Italy was the currency bloc’s third-largest economy. The European Union (EU), as well as global markets, were concerned as Italy fell into a major political and economic crisis. Italy accounted for 11% of the EU’s gross domestic output at the time (GDP). The planned spending plan aimed for a deficit of 2.4% of GDP. Meanwhile, Italy’s total government debt was 131% of GDP (more than double the eurozone limit), and the eurozone contingent had been urging Italy to reduce its debt. As a result, Italy’s eurozone partners were irritated. The challenges in Italy were caused by political chaos and an inability to build a stable coalition administration. A deal between the EU-skeptic populist group M5S and the pro-EU establishment legislators did not materialize after several weeks of lengthy discussions and negotiations. The country was thrown into a political and economic crisis as a result of this. Many of Italy’s economic issues were long-lasting, including a large number of bad loans on the balance sheets of its central banks, as well as decades of weak development. It is one of the countries with the highest government debt approximately 2.8 trillion euros in 2018. Below are statistics on the GDP of Italy:

# data[].attributes.subject
In 2018, Italy was the currency bloc’s third-largest economy. The European Union (EU), as well as global markets, were concerned as Italy fell into a major political and economic crisis. Italy accounted for 11% of the EU’s gross domestic output at the time (GDP). The planned spending plan aimed for a deficit of 2.4% of GDP. Meanwhile, Italy’s total government debt was 131% of GDP (more than double the eurozone limit), and the eurozone contingent had been urging Italy to reduce its debt. As a result, Italy’s eurozone partners were irritated. The challenges in Italy were caused by political chaos and an inability to build a stable coalition administration. A deal between the EU-skeptic populist group M5S and the pro-EU establishment legislators did not materialize after several weeks of lengthy discussions and negotiations. The country was thrown into a political and economic crisis as a result of this. Many of Italy’s economic issues were long-lasting, including a large number of bad loans on the balance sheets of its central banks, as well as decades of weak development. It is one of the countries with the highest government debt approximately 2.8 trillion euros in 2018. Below are statistics on the GDP of Italy:

# data[].attributes.headline
As mentioned, Italy has a severe economic crisis in 2018. Italy is not only experiencing an economic crisis but also political problems and an inability to build a stable coalition administration. This made it difficult for the Italian economy to be repaired due to too many political problems at that time. A government can try to influence the rate of economic growth through demand-side and supply-side policies. Cutting taxes to raise disposable income and encourage spending is known as expansionary fiscal policy. Lower taxes, on the other hand, will increase the budget deficit and lead to further borrowing When there is a drop in consumer expenditure, an expansionary fiscal policy is most appropriate. Next, cutting interest rates can boost domestic demand. Expansionary monetary policy. The government’s primary responsibility is to maintain economic and political stability so that normal economic activity can continue. Uncertainty and political polarization can deter investment and growth.

# data[].attributes.subject
As mentioned, Italy has a severe economic crisis in 2018. Italy is not only experiencing an economic crisis but also political problems and an inability to build a stable coalition administration. This made it difficult for the Italian economy to be repaired due to too many political problems at that time. A government can try to influence the rate of economic growth through demand-side and supply-side policies. Cutting taxes to raise disposable income and encourage spending is known as expansionary fiscal policy. Lower taxes, on the other hand, will increase the budget deficit and lead to further borrowing When there is a drop in consumer expenditure, an expansionary fiscal policy is most appropriate. Next, cutting interest rates can boost domestic demand. Expansionary monetary policy. The government’s primary responsibility is to maintain economic and political stability so that normal economic activity can continue. Uncertainty and political polarization can deter investment and growth.

# data[].attributes.body
Recommendations

# data[].attributes.headline
Capital inflows and access to inexpensive credit are essential for Turkey’s economic growth. Turkey was one of the emerging markets that suffered the most as global financial conditions tightened in 2018. Turkey was one of the most noteworthy victims of the global financial tightening in 2018, as it had a currency crisis followed by a recession. The Turkish Lira (TL) lost 31% of its value versus the US Dollar (USD) in 2018, dropping even more in the first eight months before rebounding after the September interest rate hike. Since then, hundreds of businesses have filed for bankruptcy, and the official unemployment rate has risen to levels not seen since the 2008 financial crisis. Turkey’s financialization, like that of many other peripheral countries, was shaped by the accumulation of fictitious capital issued by the government, with the banking system serving as a conduit between international financial markets and the Turkish Treasury, allowing the banking system to profit from interest rate arbitrage between international and domestic markets. In the 1990s, the issue of rolling over public debt created enormous earnings for Turkish capital groups while simultaneously making the Turkish economy more vulnerable to crises. Below is the data for economic problems in turkey in 2018:

# data[].attributes.subject
Capital inflows and access to inexpensive credit are essential for Turkey’s economic growth. Turkey was one of the emerging markets that suffered the most as global financial conditions tightened in 2018. Turkey was one of the most noteworthy victims of the global financial tightening in 2018, as it had a currency crisis followed by a recession. The Turkish Lira (TL) lost 31% of its value versus the US Dollar (USD) in 2018, dropping even more in the first eight months before rebounding after the September interest rate hike. Since then, hundreds of businesses have filed for bankruptcy, and the official unemployment rate has risen to levels not seen since the 2008 financial crisis. Turkey’s financialization, like that of many other peripheral countries, was shaped by the accumulation of fictitious capital issued by the government, with the banking system serving as a conduit between international financial markets and the Turkish Treasury, allowing the banking system to profit from interest rate arbitrage between international and domestic markets. In the 1990s, the issue of rolling over public debt created enormous earnings for Turkish capital groups while simultaneously making the Turkish economy more vulnerable to crises. Below is the data for economic problems in turkey in 2018:

# data[].attributes.headline
Gross domestic product (GDP), which is defined as the total value of all goods and services generated inside a country in a year, is used to quantify economic growth. Economic growth is aided by many factors. However, no single element continuously promotes the perfect or ideal level of economic growth. Recessions are unavoidable, and they can be triggered by exogenous sources such as geopolitical and financial events. Tax cuts and rebates are intended to put more money back into customers’ pockets. In an ideal world, these customers spend a part of their money at numerous enterprises, boosting sales, cash flow, and profits. Companies with more cash have the resources to raise finance, upgrade technology, and expand and grow. All of these behaviors boost productivity, which boosts economic growth. Proponents claim that tax cuts and refunds allow customers to stimulate the economy by injecting more money into it. Cutting productive public investments that encourage growth, such as education, research, and infrastructure, to fund tax cuts for the wealthy is also detrimental. Finally, a growing body of evidence suggests that investments in low-income children can have long-term positive benefits on their health, education, and incomes as adults, in addition to reducing poverty and suffering in the short term. The Tax Cuts and Jobs Act was proposed by President Trump in 2017 and passed by Congress. The bill reduced corporate taxes to 20% from 30%. Different tax brackets for individuals were also reduced. The $1.5 trillion bill aims to boost economic growth over the next ten years. It’s difficult to tell how much of the growth was caused by other variables and market forces, as it is with any stimulus used to boost economic growth.

# data[].attributes.subject
Gross domestic product (GDP), which is defined as the total value of all goods and services generated inside a country in a year, is used to quantify economic growth. Economic growth is aided by many factors. However, no single element continuously promotes the perfect or ideal level of economic growth. Recessions are unavoidable, and they can be triggered by exogenous sources such as geopolitical and financial events. Tax cuts and rebates are intended to put more money back into customers’ pockets. In an ideal world, these customers spend a part of their money at numerous enterprises, boosting sales, cash flow, and profits. Companies with more cash have the resources to raise finance, upgrade technology, and expand and grow. All of these behaviors boost productivity, which boosts economic growth. Proponents claim that tax cuts and refunds allow customers to stimulate the economy by injecting more money into it. Cutting productive public investments that encourage growth, such as education, research, and infrastructure, to fund tax cuts for the wealthy is also detrimental. Finally, a growing body of evidence suggests that investments in low-income children can have long-term positive benefits on their health, education, and incomes as adults, in addition to reducing poverty and suffering in the short term. The Tax Cuts and Jobs Act was proposed by President Trump in 2017 and passed by Congress. The bill reduced corporate taxes to 20% from 30%. Different tax brackets for individuals were also reduced. The $1.5 trillion bill aims to boost economic growth over the next ten years. It’s difficult to tell how much of the growth was caused by other variables and market forces, as it is with any stimulus used to boost economic growth.

# data[].attributes.body
Recommendation

# data[].attributes.headline
Pakistan’s freshly elected government is already coping with a balance of payments deficit, a common theme among the country’s newly elected authorities. Pakistan’s structural issues are self-inflicted, but this time there’s a Chinese debt component. Pakistan is the largest Belt and Road Initiative (BRI) partner, adding to the country’s already difficult financial circumstances. Prime Minister Khan inherited the third balance of payments problem in ten years. Pakistan’s current account deficit was $18 at the end of June 2018, up roughly 45 percent from $12.4 Billion in 2017 Excessive imports (including those related to the China-Pakistan Economic Corridor (CPEC) and lower-than-expected inflows (export revenues and remittances) have resulted in a widening current account deficit, with foreign currency reserves covering less than two months of imports-pushing Pakistan into a difficult economic situation.The fact that 2018 was a bad year for developing markets is contributing to Pakistan’s financial woes. The country’s already poor economic situation has been exacerbated by global monetary tightening, rising oil costs, and dwindling investor confidence. However, the economy has been vulnerable to a variety of debt vulnerabilities due to the country’s fundamental structural difficulties and weak macroeconomic policies.  Below is data for import, export, and deficit issues in Pakistan: 

# data[].attributes.subject
Pakistan’s freshly elected government is already coping with a balance of payments deficit, a common theme among the country’s newly elected authorities. Pakistan’s structural issues are self-inflicted, but this time there’s a Chinese debt component. Pakistan is the largest Belt and Road Initiative (BRI) partner, adding to the country’s already difficult financial circumstances. Prime Minister Khan inherited the third balance of payments problem in ten years. Pakistan’s current account deficit was $18 at the end of June 2018, up roughly 45 percent from $12.4 Billion in 2017 Excessive imports (including those related to the China-Pakistan Economic Corridor (CPEC) and lower-than-expected inflows (export revenues and remittances) have resulted in a widening current account deficit, with foreign currency reserves covering less than two months of imports-pushing Pakistan into a difficult economic situation.The fact that 2018 was a bad year for developing markets is contributing to Pakistan’s financial woes. The country’s already poor economic situation has been exacerbated by global monetary tightening, rising oil costs, and dwindling investor confidence. However, the economy has been vulnerable to a variety of debt vulnerabilities due to the country’s fundamental structural difficulties and weak macroeconomic policies.  Below is data for import, export, and deficit issues in Pakistan: 

# data[].attributes.headline
As mentioned, Pakistan facing severe import, export, and deficit problems. To avoid the significant consequences of steep and frequent variations in the number of imports, a country must be in a position where maintaining the short-term balance of payments stability is less of a worry. A country with a reasonably easy reserve position can afford to implement steep aims at stabilizing revenue in the face of large export swings, as well as to avoid recurrent short-term balance of payments imbalances and monetary reserve volatility. These perturbations, however, are likely to be countered in some way.Domestic income in both the private and governmental sectors tends to fall during periods of falling export receipts. Imports, on the other hand, could not be maintained without the implementation of proper fiscal and monetary policies to compensate for the general drop in income. The expansionary effects of fiscal and monetary measures could counteract the deflationary effects of a balance of export expansion, monetary and fiscal policies may have an opposite effect, keeping imports at a more or less stable level. Credit demand would be kept under control, and higher revenue would bolster the government’s financial condition.

# data[].attributes.subject
As mentioned, Pakistan facing severe import, export, and deficit problems. To avoid the significant consequences of steep and frequent variations in the number of imports, a country must be in a position where maintaining the short-term balance of payments stability is less of a worry. A country with a reasonably easy reserve position can afford to implement steep aims at stabilizing revenue in the face of large export swings, as well as to avoid recurrent short-term balance of payments imbalances and monetary reserve volatility. These perturbations, however, are likely to be countered in some way.Domestic income in both the private and governmental sectors tends to fall during periods of falling export receipts. Imports, on the other hand, could not be maintained without the implementation of proper fiscal and monetary policies to compensate for the general drop in income. The expansionary effects of fiscal and monetary measures could counteract the deflationary effects of a balance of export expansion, monetary and fiscal policies may have an opposite effect, keeping imports at a more or less stable level. Credit demand would be kept under control, and higher revenue would bolster the government’s financial condition.

# data[].attributes.body
Recommendation

# data[].attributes.headline
The global economy is slowing in lockstep, with growth forecasts for 2019 falling to 3% the lowest level since the global financial crisis. With increased trade barriers and geopolitical tensions, growth has slowed further and trade tensions between the United States and China will lower global GDP by 0.8 percent by 2020. In some emerging market countries, growth is also hampered by country-specific constraints, as well as structural forces such as low productivity growth and aging demographics in advanced economies. Another revision dropped 0.2 percent from the April prediction in the October World Economic Survey, which projected a minor increase in global growth to 3.4 percent in 2020. This recovery, unlike synchronous wetness, is not broad-based and remains unstable. Below is the statistic on the global economy in 2018: 

# data[].attributes.subject
The global economy is slowing in lockstep, with growth forecasts for 2019 falling to 3% the lowest level since the global financial crisis. With increased trade barriers and geopolitical tensions, growth has slowed further and trade tensions between the United States and China will lower global GDP by 0.8 percent by 2020. In some emerging market countries, growth is also hampered by country-specific constraints, as well as structural forces such as low productivity growth and aging demographics in advanced economies. Another revision dropped 0.2 percent from the April prediction in the October World Economic Survey, which projected a minor increase in global growth to 3.4 percent in 2020. This recovery, unlike synchronous wetness, is not broad-based and remains unstable. Below is the statistic on the global economy in 2018: 

# data[].attributes.headline
A steep drop in global manufacturing and trade activity slowed growth, with rising tariffs and protracted trade policy uncertainty harming investment and demand for capital goods. Furthermore, the declining vehicle sector was caused by several issues, including the long-term effects of increased emissions requirements in the eurozone and China. Overall, trade volume growth has slowed to 1% in the first half of 2019.In 2017, the International Monetary Fund estimated that around 10 percent of income in advanced economies went to just 1 percent of the population. Rising inequalities not only disrupt social cohesion but also threaten long-term growth and hamper progress on the SDGs. To sustain economic expansion and move forward on the Global Goals, countries will have to urgently raise the living standards of the most deprived and address the inequality of opportunities in the long term. These investments will not only improve the quality of growth but increase its longer-term potential. Meanwhile, the US ended 2017 by adopting a sweeping tax reform, which is expected to slightly increase GDP growth in 2018 but also contribute to a further rise in after-tax wage inequality.

# data[].attributes.subject
A steep drop in global manufacturing and trade activity slowed growth, with rising tariffs and protracted trade policy uncertainty harming investment and demand for capital goods. Furthermore, the declining vehicle sector was caused by several issues, including the long-term effects of increased emissions requirements in the eurozone and China. Overall, trade volume growth has slowed to 1% in the first half of 2019.In 2017, the International Monetary Fund estimated that around 10 percent of income in advanced economies went to just 1 percent of the population. Rising inequalities not only disrupt social cohesion but also threaten long-term growth and hamper progress on the SDGs. To sustain economic expansion and move forward on the Global Goals, countries will have to urgently raise the living standards of the most deprived and address the inequality of opportunities in the long term. These investments will not only improve the quality of growth but increase its longer-term potential. Meanwhile, the US ended 2017 by adopting a sweeping tax reform, which is expected to slightly increase GDP growth in 2018 but also contribute to a further rise in after-tax wage inequality.

# data[].attributes.body
recommendation

# data[].attributes.headline
Shobhit, S (2020, November 24). All about the Italian Economic Crisis of 2018. https://www.investopedia.com/news/all-about-italian-economic-crisis-2018/

# data[].attributes.subject
Shobhit, S (2020, November 24). All about the Italian Economic Crisis of 2018. https://www.investopedia.com/news/all-about-italian-economic-crisis-2018/

# data[].attributes.attachment_link.readable_text
The eurozone, also called the euro area, is a union of 19 European Union member states that have officially adopted the euro as their primary currency and sole legal tender. These member states exist under one monetary authority, the Eurosystem. At the beginning of 2018, Italy was the third-largest economy in the currency bloc. When Italy entered into a deep political and economic crisis, it was a concern for the European Union (EU) as well as for the global markets. At the time, Italy accounted for 11% of the EU's gross domestic product ( GDP).

At the end of September 2018, the ruling coalition comprising the Five Star Movement (M5S)-a political party that espoused a populist, antiestablishment view (and was critical of the EU)-and the Lega Nord-also a political party in Italy-submitted their 2019 budget to the European Commission.

The proposed spending plan called for a deficit equal to 2.4% of the gross domestic product (GDP). At the same time, Italy's total government debt was equal to 131% of the GDP (more than double the eurozone limit); the eurozone contingent had been pressuring Italy to decrease its debt. As a result, this move upset Italy's eurozone partners.

Failure to Form a Stable Government

Political chaos and the failure to form a stable coalition government were at the root of the problems in Italy. Despite several weeks of prolonged discussions and negotiation, an agreement failed to materialize between the EU-skeptic populist group, M5S, and the pro-EU establishment lawmakers. This left the country in a deep political and economic crisis.

After the March 2018 vote produced a hung parliament, Italy was without a proper government. At this time, the populist M5S party emerged as the largest contender; they attempted to join the far-right Lega Nord party to form a coalition government. While the two groups agreed on Giuseppe Conte, a law professor, to be their prime ministerial candidate, his surprise resignation shortly thereafter caused a stir.

This development was attributed to President Sergio Mattarella's refusal to accept a euro-skeptic candidate Paolo Savona as economy minister. Savona has been an opponent of the single currency in the past, calling it a "German Cage." He has also advocated for a "Plan B" alternative to EU membership.

Under the law, the Italian president has the authority to block individual cabinet appointments. As M5S and Lega Nord refused to offer a different choice for finance minister, the coalition went for a toss. Instead, President Mattarella appointed former International Monetary Fund (IMF) official Carlo Cottarelli as interim prime minister; this paved the way for another round of elections. Cottarelli thus became responsible for planning the new elections, as well as for introducing the new budget. (Cottarelli has a reputation of significantly cutting down on public spending, which has earned him the title "Mr. Scissors.")

Unfortunately, this decision by the president did not bode well with the M5S and Lega Nord parties. Mattarella, who was instituted by the earlier pro-EU government, faced calls for impeachment from the leaders of M5S, as a result of Mattarella's refusal to accept Savona as economy minister, appointing Cottarelli as interim prime minister, and mandating fresh elections. At the time, Lega Nord's leaders did not support the impeachment that the leaders of M5S were calling for. When these political developments hit the Italian economy, it caused further turmoil.

Weak Fundamentals in the Italian Economy

Many of Italy's economic problems were longstanding, including a high number of problem loans on its central banks' balance sheets, combined with decades of slow growth. It ranks among the countries with the most significant government debt-around 2.8 trillion euros in 2018-and the country has moreover been facing high unemployment since even before the 2007-2009 financial crisis made things worse.

In fact, after the 2008 financial crises, Italy never made any significant strides towards a recovery. Greece and Italy were the two of the advanced economies carrying the highest debt burden at the beginning of the crisis; in subsequent years, only Greece has suffered a more severe and more protracted economic depression.

However, the bigger challenge faced by Italy is surrounding the snap elections, meant to take place in early 2019. Experts opine that it will be fought over the country's role in the EU and eurozone. The voting, as well as the results, will put a big question mark over the EU's future. The elections are seen as a quasi-referendum about Italy's role in the EU. The economic impact of Italian developments is also a cause of concern as the nation appears set to join other ailing economies, like Spain and Portugal, leading to larger problems for the EU.

If the anti-Brussels, anti-euro coalition comes to power with a decisive majority, the fate of the EU and the euro common currency will be at risk.

The Bottom Line

Though the current Italian crisis is worse than that of Greece in 2015, the situation is not a death-knell. The EU survived a crisis in 2012 when several smaller EU members were perceived to be potential defaulters and fears were looming large that the euro would collapse. Mario Draghi, head of the European Central Bank (ECB), unveiled the emergency program of bond buying, which ended the risk of a destructive debt spiral and boosted investors' confidence.

Going forward, it will be a volatile situation in Italy and in the eurozone until the election sorts things out. A clear mandate to pro-EU groups is expected to soothe the situation, but a victory for anti-EU parties may deepen the crisis, while hung results may see fresh attempts at coalitions.

# data[].attributes.attachment_link.title
All About the Italian Economic Crisis of 2018

# data[].attributes.attachment_link.description
The eurozone, also called the euro area, is a union of 19 European Union member states that have officially adopted the euro as their primary currency and sole legal tender. These member states exist under one monetary authority, the Eurosystem. At the beginning of 2018, Italy was the third-largest economy in the currency bloc.

# data[].attributes.headline
Akcay, U (2019). The making of Turkey’s 2018-2019 economic crisis. .https://www.econstor.eu/handle/10419/200182

# data[].attributes.subject
Akcay, U (2019). The making of Turkey’s 2018-2019 economic crisis. .https://www.econstor.eu/handle/10419/200182

# data[].attributes.attachment_link.readable_text
Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200182

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.

# data[].attributes.attachment_link.title
The making of Turkey's 2018-2019 economic crisis

# data[].attributes.attachment_link.description
Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200182 Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.

# data[].attributes.headline
Daniel, F.R (2018, October 31) An Economic crisis in Pakistan again: What different this time? https://www.csis.org/analysis/economic-crisis-pakistan-again-whats-different-time

# data[].attributes.subject
Daniel, F.R (2018, October 31) An Economic crisis in Pakistan again: What different this time? https://www.csis.org/analysis/economic-crisis-pakistan-again-whats-different-time

# data[].attributes.attachment_link.readable_text
October 31, 2018

Pakistan’s newly-elected government is already dealing with a balance of payments crisis, which has been a consistent theme for the nation’s newly elected officials. Pakistan’s structural problems are homegrown, but what is different this time around is an added component of Chinese debt. Pakistan is the largest Belt and Road (BRI) partner adding another creditor to its already complicated economic situation.

Pakistan’s system is ill-equipped to make changes which would avoid future excessive debt. A bailout from the International Monetary Fund (IMF) is probably the safest bet for the country although it is unclear whether the United States will support the program. How Pakistan decides to handle its debt crisis could provide insight into how the U.S., IMF, and China will resolve development issues in the future. Beijing is a relatively new player in the development finance world so much is to be learned from how it deals with Pakistan and how it could possibly maneuver in other developing countries in Asia, Africa, and Latin America.

Q1: What is Pakistan’s current financial and economic situation?

A1: Pakistan held its most recent elections in July 2018. The Pakistan Tehreek-e-Insaf party gained over 100 seats in the parliament, and its founder Imran Khan, a famous cricket team captain, was installed as prime minister. Prime Minister Khan has inherited a balance of payments crisis, the third one in the last 10 years. By the end of June 2018, Pakistan had a current account deficit of $18 billion, nearly a 45 percent increase from an account deficit of $12.4 billion in 2017. Exorbitant imports (including those related to the China-Pakistan Economic Corridor (CPEC)) and less-than-projected inflows (export revenues and remittances) have led to a current account deficit widening, with foreign currency reserves levels covering less than two months of imports—pushing Pakistan towards a difficult economic situation.

Part of Pakistan’s financial crisis stems from the fact that 2018 was a poor year for emerging markets. Global monetary tightening, increased oil prices, and reduced investor confidence have negatively impacted the country’s already precarious economic situation. But the country’s deep structural problems and weak macroeconomic policies have further exposed the economy to an array of debt vulnerabilities.

Pakistan has had an overvalued exchange rate, low interest rates, and subdued inflation over the last few years. This loose monetary policy has led to high domestic demand, with two-thirds of Pakistan’s economic growth stemming from domestic consumption. An overvalued exchange rate has led to a very high level of imports and low level of exports. Pakistan’s high fiscal deficit was accelerated even further in 2017 and 2018 because elections have historically caused spending to rise (both of the most recent fiscal crises followed elections). Perhaps the greatest financial issues facing Pakistan are its pervasive tax evasion and chronically low level of domestic resource mobilization. Taxes in Pakistan comprise less than 10 percent of GDP, a far cry from the 35 percent of countries that are part of the Organisation for Economic Co-operation and Development (OECD). Pakistan also suffers from impediments in the energy sector through frequent and widespread power outages that hurt its competitiveness.

In Western media, Chinese investment is often cited as the main driver of Pakistan’s debt crisis. This is somewhat true as China’s BRI makes Pakistan a key partner through the shared CPEC. The CPEC is a $60 billion program of infrastructure, energy and communication projects that aims to improve connectivity in the region. CPEC infrastructure costs have certainly placed a greater debt burden on Pakistan, but the current structural problems are homegrown; the root cause of the energy shortages is now less a matter of power generation, and more of fiscal mismanagement of the power sector.

Q2: What are Pakistan’s options?

A2: Pakistan appears to be in perpetual crisis-mode, and for too long the Pakistani government has been overly reliant on U.S. bilateral assistance. While it may not be the first choice of the Pakistani government, an IMF bailout is the most likely outcome of this financial crisis because it is probably the only path for Pakistan to regain its macroeconomic stability. Any “bailout” from a bilateral donor (meaning China or Pakistan’s Gulf State friends, including Saudi Arabia which has recently provided Pakistan $3 billion for a period of one year as balance-of-payment support) will not get at the root issues that Pakistan faces—its loose macroeconomic, fiscal, and monetary policies. Pakistan needs to get its house in order and remedy many of its domestic economic issues. 18 out of Pakistan’s 21 IMF programs over the last 60 years have not been completed despite obtaining over $30 billion in financial support across those programs. Just like today’s current financial crisis, Pakistan’s last two IMF packages (in 2008 and 2013) were also negotiated by incoming governments.

Q3: Would the U.S. support a new IMF Pakistan program?

A3: The current U.S. administration and Congress would not be supportive of additional bilateral funding to Pakistan—meaning money coming directly from the United States. Since 2001, Pakistan has been the beneficiary of the U.S. Coalition Support Fund (CSF), which reimburses allies for costs incurred by war on terrorism. The CSF is used to reimburse Pakistan for U.S. military use of its network infrastructure (e.g., ports, railways, roads, airspace) so that the United States can prosecute the war in neighboring Afghanistan, as well as certain Pakistani military counter-terrorism operations. The CSF for Pakistan has been as high as $1.2 billion per year, and, in recent years, $900 million per year. With nearly $1 billion in CSF distributed every year, along with $335 million in humanitarian assistance, it will be difficult to convince Congress to appropriate more funds for a Pakistan bailout yet. However, due to inaction on the part of Pakistan to expel or arrest Taliban insurgents operating from Pakistani territory, the United States has recently cut another $300 million from the CSF, bringing the total to $850 million in U.S. assistance withheld from Pakistan this year. In fact, all security assistance to Pakistan, whether it is international military education and training, foreign military financing, or the CSF, has been suspended for this year according to one State Department official.

An IMF program for Pakistan faces resistance from some members of Congress. A group of 16 senators has already signed a letter to President Trump that outlines their opposition to bailing out Pakistan because the IMF package would, in effect, be bailing out Chinese banks.

The Trump administration has also taken a hardline stance towards assisting Pakistan with its financial crisis. Secretary of State Pompeo stated this past July that he would not support an IMF bailout that went towards paying off Chinese loans. In September, Secretary Pompeo visited Pakistan, and there were indications that the United States would not block an IMF program. If an IMF program is enacted, there is no doubt that it would have stronger conditionality and a greater insistence on full transparency of Pakistan’s debt obligations.

Q4: Would an IMF package be a bailout of the Chinese?

A4: The terms of Pakistan’s loans with China are currently unclear and multiple news outlets have reported that Pakistan has refused to share CPEC information with the IMF. However, it is not unreasonable to presume that the terms in those contracts would be more demanding than terms typically asked by the IMF. Unless the terms between Pakistan and China and its state-owned enterprises (SOEs) are disclosed and made clear to the IMF, then it is unwise for the IMF to proceed with a bailout package.

The IMF’s focus is not in projecting power and influence; rather it seeks to help struggling nations get back on their feet. The same cannot be said for China. China appears to be most interested in spreading its influence and gaining valuable assets for its military and expanding economy, while at the same time exporting its surplus capacity for infrastructure building. In its annual report to Congress, the Department of Defense reiterated this concern, “countries participating in BRI [such as Pakistan] could develop economic dependence on Chinese capital, which China could leverage to achieve its interests.”

Of Pakistan’s nearly $30 billion trade deficit, 30 percent is directly attributable to China. If China were concerned about the economic crisis in Pakistan, it would make immediate concessions which Pakistan Finance Minister Asad Umar says China is working on. To help with the crisis, China could readjust its trade surplus with Pakistan in different ways. For example, China could buy Pakistani cement and other purchases in the short term to illustrate that they are aware of and swiftly responding to the economic turmoil in Pakistan. Other nations have struggled with debt obligations to China. For instance, in July 2017, Sri Lanka signed over a 99-year lease for Hambantota Port to a Chinese SOE because of Sri Lanka’s inability to pay for BRI costs. Malaysia took a different path and decided to cancel major infrastructure projects with China in August 2018 due to worries that they would increase its debt burden.

Q5: What are the consequences if there is no IMF package?

A5: It is likely that China will provide even more assistance to broaden Pakistan’s dependency. Chinese banks and SOEs have already invested heavily into Pakistan, so much so that state bank loans have not been fully disclosed to the global community. In fact, Pakistan’s Status Report for July 2017 through June 2018 shows that Chinese commercial banks hold 53 percent of Pakistan’s outstanding commercial debt. However, that percentage may be even higher than the report depicts. While China and Pakistan have agreed to make all CPEC projects readily available to the public, the information is scattered and often left blank on essential financial reports (see July-June 2017 document), and so it is difficult to obtain a full sense of the degree of Pakistan’s indebtedness to China. Again, much of the loan information provided by the Pakistani government, especially concerning China, is not entirely transparent.

If China chooses to follow through and become the “point person” for an assistance package, the pressure will be taken off the IMF. But, if the United States does not support an IMF package, it will forego major geopolitical potential in the region to its main competitor, China.

Pakistan represents a litmus test of all future cases in which the IMF, United States, China, and any emerging market country are all involved. Depending on how Beijing chooses to navigate Pakistan’s financial crisis, China may soon find itself responsible for rectifying the debt burdens of Zambia and many other BRI countries.

Q6: What are U.S. geopolitical “equities” in Pakistan?

A6:  The United States is invested in Pakistan because of its significant geopolitical importance.

1. Pakistan is an important component of the balance of power in South Asia. Both India and Pakistan have nuclear weapons capabilities. Moreover, China, India, and Pakistan have been in dispute over the Kashmir region since 1947. Regional stability is in the interest of the United States.

2. Despite its ambiguous stance on militant groups, Pakistan is ostensibly an ally of the United States because of its proximity to Afghanistan. Since the War on Terror began in 2001, Pakistan has been an active partner in the elimination of core al Qaeda within Pakistan and has facilitated aspects of the U.S. military campaign in Afghanistan.

3. The United States now seeks a negotiated settlement to the conflict in Afghanistan. To accomplish this, perhaps the United States will come to Pakistan with a simple offer: “deliver the Taliban, and we will give you the IMF.”

4. Whereas previous administrations may have tried to “play nice” with Pakistan, under the Trump administration, there is a chance that the U.S. government will push the IMF to adopt stricter terms for a Pakistan bailout, citing the Pakistani government’s failures of the last two programs.

5. Other than strategic military importance, one of the most important national security challenges to the United States is Pakistan’s demographic trends. Currently, over 64 percent of Pakistanis are under the age of 30—the largest percentage of youth in the country’s history. Over the next 30 years, Pakistan’s population will increase by over 100 million, jumping from 190 million to 300 million by 2050. The spike in youth population presents an opportunity for the U.S. government and private sector to increase investment in Pakistan. Pakistan’s economy must generate 1 million jobs annually for the next three decades and GDP growth rates must equal 7 percent or more per year to keep up with the population boom. Were Pakistan’s economy to collapse, the world would see the first instance of a failed state with a substantial arsenal of nuclear weapons.

6. An economically healthy Pakistan could be a large market for U.S. goods and services. If the U.S.-Pakistan relationship is strained as a result of this financial crisis, it will not only harm the United States militarily but will also harm U.S. businesses and Pakistani consumers.

Q7: Should the U.S. support an IMF package to Pakistan?

A7: Given the geostrategic importance of Pakistan for the United States, we should support a package but with stronger conditionality than in 2013 along with full transparency and disclosure of its debt obligations.

Daniel F. Runde is senior vice president, director of the Project on Prosperity and Development, and holds the William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Richard Olson is a non-resident senior associate at CSIS. He is the former U.S. ambassador to the United Arab Emirates and Pakistan; most recently he served as the U.S. special representative for Afghanistan and Pakistan during the Obama administration. Special thanks to CSIS Project on Prosperity and Development program coordinator Owen Murphy and intern Austin Lucas for their contributions to this analysis.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2018 by the Center for Strategic and International Studies. All rights reserved.

# data[].attributes.attachment_link.authors[].name
Senior Associate, Project on Prosperity and Development

# data[].attributes.attachment_link.title
An Economic Crisis in Pakistan Again: What’s Different This Time?

# data[].attributes.attachment_link.description
Pakistan’s newly-elected government is already dealing with a balance of payments crisis, which has been a consistent theme for the nation’s newly elected officials. Pakistan’s structural problems are homegrown, but what is different this time around is an added component of Chinese debt. Pakistan i…

# data[].attributes.headline
 Polina, T (2017, July 22) Pakistan economy in crisis: enormous cad in the financial year 2017.https://www.valuewalk.com/2017/07/pakistan-economy-crisis/

# data[].attributes.subject
 Polina, T (2017, July 22) Pakistan economy in crisis: enormous cad in the financial year 2017.https://www.valuewalk.com/2017/07/pakistan-economy-crisis/

# data[].attributes.attachment_link.readable_text
Pakistan economy suffers from the enormous current account deficit (CAD) increase, sending shockwaves across the nation.

As China and India remain locked in what appears to be the most volatile situation on the Indian subcontinent in recent years, Pakistan enters the political crisis spurred by the ongoing investigation into the government's corruption, leaving the country's economy in tatters.

The Pakistan economy current account deficit (CAD) skyrockets in Fiscal Year 2017, as the shocking figure $12.1 billion - even the most gloomy forecasts had not estimated such a fiasco - is close to beating the decade highs. While exports continue nose-diving despite the economy-accelerating China-Pakistan Economic Corridor (CPEC) project, the Nawaz Sharif's government has proven unable to contain the CAD from growing, as the Pakistan Stock Exchange crashed lately and the currency experienced its biggest single-day drop since the financial crisis in 2008.

In 2021, the financial world watched as Melvin Capital, formerly one of the most successful hedge funds, plunged 55% amid a Reddit-inspired short squeeze. In one month, the hedge fund lost around $7 billion and was bailed out by Citadel and Point72 Asset Management. Melvin, which was founded and managed by Gabe Plotkin, made a Read More

The Pakistan economy is now headed to a new economic crisis, as the nation's economy performance has been slowly spiraling to the disturbing figures of the nearly decade-old economic crisis. The Nawaz government, which has been shaken by the corruption charges lately, seems unable to plug the growing CAD hole, as the country hopes the outcome of the general election in 2018 would revive the economy.

Pakistan Economy In Pieces, As IMF Unlikely to Fund A Corrupt Government

Pakistan economy, which has been hailed by financial experts all over the world for its speedy accelerating performance last year and was even proclaimed the top-performing market in Asia, is on the brink of collapse, as the country's current account deficit (CAD) is nearing decade highs.

A report by Credit Suisse shows gloomy results of the end of Fiscal Year 2017, as the Pakistan economy showed the CAD standing at $12.09 billion, a massive 149% increase since the end of FY2016. Even the most negative estimates from the Nawaz government's critics had expected the CAD to be at around $8 billion by the end of FY2017, but the volatile political saga surrounding Nawaz's corruption charges as well as the government's lack of actions to revive the Pakistan economy continue damaging the country's economy.

The somber report by Credit Suisse sent panic waves across south Asia's second-largest economy, with many fearing that even foreign investments from China and the benefits of CPEC will not be enough to put Band-Aid on the bleeding economy. Many also doubt that the International Monetary Fund (IMF) would agree to save the Pakistan economy from crisis at least while the current government - plagued by the corruption charges - remains in office.

Pakistan's CAD Nearing 2008 Financial Crisis Highs

While the balance between a country's exports and imports remains the major determinant of the CAD, Pakistan exported goods worth $21.66 billion in FY2017, down from $21.97 billion in fiscal year last year. But it is the country's falling exports that have taken a toll on the Pakistan economy.

In FY2017, Islamabad imported goods worth $48.54 billion compared to $41.25 billion last year. With the ever-growing current account deficit, Pakistan is nearing decade highs - $12.1 billion - that left the country's nation in tatters during the 2008 financial crisis.

Weak exports and increased exports are not the only determinants that have contributed to the enormous increase in the CAD for the Pakistan economy. Heavy debt servicing and recovering oil prices only further aggravated the weakening economy, while the government's incapability to manage its balance of payments has thrown Pakistan into the darkest hole of economic uncertainty.

'CPEC Would Attract Huge Investments from Abroad': Was It A Myth?

While it is unclear if the Nawaz government will have enough competence and resources to plug the hole of the growing deficit - with either money from the IMF or a loan from China - Pakistan's foreign currency reserves keep plummeting. As a result, the nation's rupee is on the brink of depreciation, while monetary policies are likely to be tightened within the next weeks or months.

Despite the seeming success of CPEC and its promised benefits for the Pakistan economy, Islamabad has been suffering from low levels of foreign direct investment (FDI) in recent years, data from Credit Suisse shows. While many Chinese and Pakistan economic experts predicted that CPEC would attract large inflows of investments from countries all over the world, Beijing still dominated the FDI.

In FY2017, the Pakistan's FDI increased to only $2.41 billion from $2.30 billion in the previous year, largely thanks to the Chinese investment injections spurred by CPEC. More foreign investment from other key economic players - both Asian and international - are nowhere to be seen at this point.

The ongoing investigation into the Nawaz government's corruption has further scared away investors from pouring their money into the Pakistan economy, as it would not be unprecedented for investors to stay away from nations run by corrupt politicians.

If Nawaz Is Removed From Power, Can Pakistan Economy Be Saved?

Despite the fact that the Pakistan economy showed surreal growth last year - in part spurred by the Chinese investment in CPEC - Pakistani people no longer consider it one of the major victories of the Nawaz government amid the corruption investigation that could unseat the Prime Minister before election 2018.

Pakistani people have seen the nose-diving economy in recent months on top of the corruption scandal, and it was enough for them to turn away from the ruling government.

Friday, July 21, may become the last day of Nawaz's rule and the day of political change for south Asia's second-largest economy. A Supreme Court hearing into the scandalous Panama Papers case could potentially remove Nawaz from power as investigators are looking into the allegedly forged documents by the PM.

In what could become one of the most dramatic political turns for Pakistan in its history, there is also a high chance that Nawaz could step down voluntarily amid the growing pressure against him. It is unlikely, however, that stepping down would allow his party to win the election next year, which means the Pakistan economy will have to rely on fresh faces to revive it and prevent a gruesome financial crisis.

After a recent Capital Economics study said the Pakistan economy was "likely to slow" in 2018-19, only quick and strict measures from a new government could save the nation from the economic crisis.

Updated on

Polina Tikhonova is a writer, journalist and a certified translator. Over the past 7 years, she has worked for a wide variety of top European, American, Russian, and Ukrainian media outlets. Polina holds a Master's Degree in English Philology from the University of Oxford and a Bachelor's Degree in Journalism from the Saint Petersburg State University. Her articles and news reports have been published by many newspapers, magazines, journals, blogs and online media sources across the globe. Polina is fluent in English, German, Ukrainian and Russian.

# data[].attributes.attachment_link.title
Pakistan Economy In Crisis: Enormous CAD In Financial Year 2017

# data[].attributes.attachment_link.description
Pakistan economy suffers from the enormous current account deficit (CAD) increase, sending shockwaves across the nation. As China and India remain locked in what appears to be the most volatile situation on the Indian subcontinent in recent years, Pakistan enters the political crisis spurred by the ongoing investigation into the government's corruption, leaving the country's economy in tatters.

# data[].attributes.attachment_link.readable_text
Following a period of recovery after the 2014 Gaza war, growth in the Palestinian territories dropped to 0.7 percent in Q1 2017 as reconstruction efforts decelerated and private consumption slowed down. At 29 percent, unemployment continues to be stubbornly high. Given the ongoing constraints to economic competitiveness, medium term growth is projected at 3 percent. Lower than expected aid and the possibility of further conflict pose down-side risks to growth and employment.

Recent Developments

The latest war in Gaza had severe social and economic consequences and caused the Palestinian economy to slip into recession in 2014. Reconstruction efforts allowed growth to recover to an annual average of 3.4 percent in 2015-16. However, aid receipts for reconstruction have significantly slowed in 2017 leading to a sharp deceleration in reconstruction activities. This, along with a slowdown in private consumption in the West Bank due to political tensions pushed real GDP growth down to a mere 0.7 percent in the first quarter of the year.

At 29 percent, the unemployment rate in the Palestinian territories remains stubbornly high. Unemployment in Gaza, at 44 percent, is more than twice as high as that in the West Bank; more than 60 percent of those aged between 15 and 29 in Gaza are out of work.

# data[].attributes.attachment_link.title
Palestine’s Economic Outlook - October 2017

# data[].attributes.attachment_link.description
Palestine’s Economic Outlook - October 2017

# data[].attributes.attachment_link.readable_text
By Gita Gopinath

The global economy is in a synchronized slowdown and we are, once again, downgrading growth for 2019 to 3 percent, its slowest pace since the global financial crisis. Growth continues to be weakened by rising trade barriers and increasing geopolitical tensions. We estimate that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8 percent by 2020. Growth is also being weighed down by country-specific factors in several emerging market economies, and by structural forces, such as low productivity growth and aging demographics in advanced economies.

In the October World Economic Outlook, we are projecting a modest improvement in global growth to 3.4 percent in 2020, another downward revision of 0.2 percent from our April projections. However, unlike the synchronized slowdown, this recovery is not broad-based and remains precarious.

The weakness in growth is driven by a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods. In addition, the automobile industry is contracting owing also to a variety of factors, such as disruptions from new emission standards in the euro area and China that have had durable effects. Overall, trade volume growth in the first half of 2019 has fallen to 1 percent, the weakest level since 2012.
We are downgrading growth for 2019 to 3 percent, its slowest pace since the global financial crisis.
In contrast to extremely weak manufacturing and trade, the services sector continues to hold up almost across the globe. This has kept labor markets buoyant and wage growth and consumption spending healthy in advanced economies. There are, however, some initial signs of softening in the services sector in the United States and euro area.

Monetary policy has played a significant role in supporting growth. In the absence of inflationary pressures and facing weakening activity, major central banks have appropriately eased to reduce downside risks to growth and to prevent de-anchoring of inflation expectations. In our assessment, in the absence of such monetary stimulus, global growth would be lower by 0.5 percentage points in both 2019 and 2020.

Advanced economies continue to slow towards their lower long-term potential. Growth has been downgraded to 1.7 percent for 2019 (compared to 2.3 percent in 2018) and it is projected to stay at this level in 2020. Strong labor market conditions and policy stimulus are helping to offset the negative impact from weaker external demand for these economies.

Growth in emerging market and developing economies has also been revised down to 3.9 percent for 2019 (compared to 4.5 percent in 2018) owing in part to trade and domestic policy uncertainties, and to a structural slowdown in China.

The uptick in global growth for 2020 is driven by emerging market and developing economies that are projected to experience a growth rebound to 4.6 percent. About half of this rebound is driven by recoveries or shallower recessions in stressed emerging markets, such as Argentina, Iran, and Turkey, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, India, Mexico, Russia, and Saudi Arabia. There is, however, considerable uncertainty surrounding these recoveries, especially when major economies like the United States, Japan, and China are expected to slow further into 2020.
Escalating risks
In addition, there are several downside risks to growth. Heightened trade and geopolitical tensions, including Brexit-related risks, could further disrupt economic activity, and derail an already fragile recovery in emerging market economies and the euro area. This could lead to an abrupt shift in risk sentiment, financial disruptions, and a reversal in capital flows to emerging market economies. In advanced economies, low inflation could become entrenched and constrain monetary policy space further into the future, limiting its effectiveness.
Policies to reignite growth
To rejuvenate growth, policymakers must undo the trade barriers put in place with durable agreements, rein in geopolitical tensions, and reduce domestic policy uncertainty. Such actions can help boost confidence and reinvigorate investment, manufacturing, and trade. In this regard, we look forward to more details on the recent tentative deal reached between China and the United States. We welcome any steps to de-escalate tensions and to roll back recent trade measures, particularly if they can provide a path towards a comprehensive and lasting deal.

To fend off other risks to growth and to raise potential output, economic policy should support activity in a more balanced manner. Monetary policy cannot be the only game in town. It should be coupled with fiscal support where fiscal space is available, and policy is not already too expansionary. Countries like Germany and the Netherlands should take advantage of low borrowing rates to invest in social and infrastructure capital, even from a pure cost-benefit perspective. If growth were to deteriorate more severely, an internationally coordinated fiscal response, tailored to country circumstances, may be required.

While monetary easing has supported growth, it is essential that effective macroprudential regulation be deployed today to prevent mispricing of risk and excessive buildup of financial vulnerabilities.

For sustainable growth, it is important that countries undertake structural reforms to boost productivity, improve resilience, and lower inequality. Reforms in emerging market and developing economies are also more effective when good governance is already in place.

The global outlook remains precarious with a synchronized slowdown and uncertain recovery. At 3 percent growth, there is no room for policy mistakes and an urgent need for policymakers to support growth. The global trading system needs to be improved, not abandoned. Countries need to work together because multilateralism remains the only solution to tackling major issues, such as risks from climate change, cybersecurity risks, tax avoidance and tax evasion, and the opportunities and challenges of emerging financial technologies.

# data[].attributes.attachment_link.title
The World Economy: Synchronized Slowdown, Precarious Outlook

# data[].attributes.attachment_link.description
By Gita Gopinath عربي, 中文, Español, Français, 日本語, Português, Русский The global economy is in a synchronized slowdown and we are, once again, downgrading growth for 2019 to 3 percent, its slowest pace since the global financial crisis. Growth continues to be weakened by rising trade barriers and increasing geopolitical

# data[].attributes.attachment_link.readable_text
Governments in emerging economies have, over the decades, tried many different policy agendas to stimulate development, accelerate growth, alleviate poverty, and achieve any number of other goals to mixed success. After studying emerging economies' performance over 50 years, we find that countries tend to achieve the strongest and most consistent growth when they have adopted measures to improve their own effectiveness and encourage vibrant competition that enables the rise of strong companies that drive growth. This growth in turn has contributed to massive improvements in social indicators with more than one billion people lifted out of poverty since 1990.

Stay current on your favorite topics

In 2018, the McKinsey Global Institute (MGI) looked at the GDP per capita track record of 71 emerging economies over 50 and 20 years and identified 18 that outperformed the others. Seven long-term outperformers achieved or exceeded real annual per capita GDP growth of 3.5 percent from 1965 to 2016, while 11 recent outperformers achieved per capita growth of at least 5.0 percent over the 20 years ending in 2016.

The 53 other developing economies studied fell into one of two other categories: 39 were middling economies that made less or inconsistent improvement in per capita GDP relative to the United States from 1965 to 2016, and the remaining 14 were underperformers that lost ground to the United States on per capita GDP over those same 50 years. The exhibit highlights the correlation among outperformance, and improvement in government effectiveness (as measured by the World Bank), regulatory quality, and the rule of law. (For the full report, see " Outperformers: High-growth emerging economies and the companies that propel them," McKinsey Global Institute, September 2018.)

In this article, we focus on government actions that contributed to outperformers' economic growth and how governments can sustain that support. Macroeconomic policies may be the first tools countries consider when they want to accelerate economic growth, and they are important. But other useful levers have received less attention. Outperformers became outperformers in part by focusing on improving government productivity and creating a very competitive business environment that spurs companies to improve their productivity as well. While the specific means to achieve these goals may change-after all, the global economy is continually reshaped by more sophisticated automation, shifting trade patterns, and changing demographics-innovative governments and competitive companies can find a way to move forward.

Governments in outperforming economies tend to be more open to experimenting with new approaches to markets and regulations by using pilot programs to test new ideas in a variety of contexts, modifying them as necessary, and then scaling up policies that work.

Would you like to learn more about our Public Sector Practice?

Many governments have established their own delivery labs and delivery units to test new approaches to delivering services. China famously used special economic zones to test policies before introducing them broadly. The Monetary Authority of Singapore uses a "regulatory sandbox" to relax regulations temporarily for select private-sector players to encourage innovation in fintech. Some nongovernmental groups, such as the Abdul Latif Jameel Poverty Action Lab in Cambridge, Massachusetts, work with governments on randomized control trials, in which the efficacies of interventions are tested and evaluated like science experiments.

Governments have also worked to improve the capabilities of the public sector, including by hiring better government clerks, inspectors, and regulators and seeking innovative ways to train them. For example, South Korea invested in sending civil servants abroad to learn from those in several highly regarded countries, while China systematically rotates promising bureaucrats by function and geography.

Outperformers' enthusiasm for experimentation grows out of the realization that public-sector implementation and accountability are important to building a stronger economy and promoting a pro-growth agenda of productivity, income, and demand. That agenda includes government efforts, such as mandatory contributions to pension plans, to encourage domestic capital accumulation and reduce dependence on more volatile foreign capital.

Just as important are government policies to foster competition within sectors. While some assert that problems like higher regulatory barriers to entry, corruption, cronyism, and fragmented markets make developing economies less competitive than their high-income counterparts, we find that emerging economies can be highly competitive environments and this competitiveness contributes to their success in developing corporate leaders. Outperforming emerging economies have about twice as many large companies (defined as public companies with annual revenues of at least $500 million) as other emerging economies relative to the size of their economies: just over 160 companies per $1 trillion of GDP in 2016 versus 80 companies in non‑outperforming peers and 95 in high-income countries.

With so much competition in outperforming economies, companies that reach the top of their sectors find it difficult to stay there. In those economies, only 45 percent of the companies that reached the top quintile by measure of economic-profit generation between 2001 and 2005 managed to stay in place for a decade, according to our analysis. In high-income economies, 62 percent stayed on top in the same decade.

Amid an environment of such contested leadership, big companies in outperforming economies are motivated to grow rapidly and improve productivity by adopting new technology, innovating, experimenting, and sharpening their competitive edges against local rivals, then expanding internationally. As a result, their revenue relative to GDP almost tripled from 22 percent between 1995 and 1999 to 64 percent between 2011 and 2016, and their contribution of value added to national GDP also grew rapidly, from 11 percent in 1995 to 27 percent in 2016-or double the share among non‑outperforming emerging economies.

Outperformers: High-growth emerging economies and the companies that propel them

Stay current on your favorite topics

Governments can stimulate economic growth in many other ways. Companies in many outperforming economies face fewer regulatory and tax barriers compared with companies in other countries. This, in turn, encourages business creation and improved efficiency. According to data from the World Bank Enterprise Survey, companies in outperforming economies are less likely than those in other developing economies to consider tax management a major obstacle (9 percent of respondents versus 23 percent). Similarly, fewer companies in outperforming economies reported customs delays and trade barriers (9 percent versus 16 percent) that could hinder exporting and importing activities. Senior managers in other developing economies report spending 11 percent of their time on government regulatory issues, while their peers in outperformer economies say they spend only 5 percent.

Outperformers have changed the global economy in recent decades, becoming main drivers of global growth and consumption. While congratulations are in order, complacency is not. Even top-performing regions have room for improvement, and all countries will face new challenges as the global landscape evolves. Yet the examples of the outperformers indicate there is still opportunity for those willing to innovate and reform. For the sake of their own society and the global economy, business leaders and policy makers must seize that opportunity.

Podcast - McKinsey Global Institute

# data[].attributes.attachment_link.title
How governments in emerging economies can help boost and sustain growth

# data[].attributes.attachment_link.description
Governments in emerging economies have, over the decades, tried many different policy agendas to stimulate development, accelerate growth, alleviate poverty, and achieve any number of other goals to mixed success.

# data[].attributes.attachment_link.readable_text
If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

To log in and use all the features of Khan Academy, please enable JavaScript in your browser.

# data[].attributes.attachment_link.title
Macroeconomics | Economics | Khan Academy

# data[].attributes.attachment_link.description
If you're seeing this message, it means we're having trouble loading external resources on our website. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. To log in and use all the features of Khan Academy, please enable JavaScript in your browser.

# data[].attributes.headline
Name: Nurul Ashikin Bt Samsuddin (82062)

# data[].attributes.subject
Name: Nurul Ashikin Bt Samsuddin (82062)