Economic Analysis of Different Countries - Term Paper Example

ECONOMIC ANALYSIS OF DIFFERENT COUNTRIES By Professor Class University City Date of submission Contents Contents 1 1.0 Critical analysis of selected Countries 3 1.1 United States 3 1.1.1 Economic performance 4 1.1.2 International trade 5 1.1.3 Investment indicators 6 2.0 China 7 2.1 Macroeconomic performance 8 2.2 International trade 9 2.3 Investment indicators 10 3.0 Australia 11 3.1 Macroeconomic performance 11 3.2 International trade 12 3.3 Investment indicators 13 4.0 Bangladesh 14 4.1 Economic performance 14 4.2 International trade 15 4.3 Investment indicators 16 5.0 Comparison of the economic status of the U.S., China, Bangladesh, and Australia 17 References 20 Introduction Economic factors in the contemporary world play an important role in the characterization of the countries (McCusker & Thomson Gale, 2006, pp.132). Moreover, the market trends are changing and traders are looking for markets that would ensure positive returns. It is from such background that the essay analysed the economic performance of some selected countries. These countries include developed, developing, and the underdeveloped. The countries include the United States, China, Bangladesh, and Australia. The U.S. offers global markets for most imports and exports while Australia has been showing stability in its economic growth and currency. On other hand, Bangladesh, a country that has been experiencing economic recession due to local wars emanating from the neighbouring countries. China reflects a country that in the last decade has been attracting foreign investments especially those related to technology. Furthermore, the research focused on the economic performance, international trade, and investment indicators (Winston & Rus, 2008, pp.116). Upon establishing the baseline information of these factors for every country, the essay made a comparison for these countries. Moreover, in each country, the essay established the best performing businesses and their financial bases. 1.0 Critical analysis of selected Countries 1.1 United States 1.1.1 Economic performance Despite the modest growth rate of the US since it ended its Great Recession, accommodation and employment rates have gained some attractions in the recent quarters. However, with increasing mortgage rates, low growth of quality jobs, and declined disposable income, there are concerns over the performance of the economy (Winston, C., Rus, & G. 2008, pp.119). The economy of the country has expanded with 3.9% in the first quarter within the three months to June 2015. Compared to the previous growth of 3.7%, the growth is mainly attributed to increased consumer spending and construction activities. In relation to expenditures, personal consumption rate in the country accounts for 68% of the Gross Domestic Product (GDP) constituting both the goods and services standing at 23% and 45% respectively (United States, 2003, pp.272). According to the Commerce Department (2010, pp.112), both consumer spending and cheaper fuel prices are the major factors that contributed to the growth. The economy of the country entered 2015 on the stronger streak of consumer spending years. However, the released first growth figures of 2014 indicate inadequate strength in the current expansion (International Monetary Fund, 2012, pp.65). The report released by the Commerce Department offered both hope and the red flag to the country, which is considered having the largest economy. Unfortunately, most internal companies suffered a dual blow due to increased number of foreign investors. Most Americans preferred purchasing foreign goods that they considered cheaper because the dollar strength (United States, 2010, pp.110). Moreover, the world economy slumped down the demand for the U.S. products exported in other countries, which increased the trade gap and slicing the percentage point off the economic growth. Cheaper oil is also weighing the economy. Since the prices of oils began to fall freely last year, investments in oil in the country have reduced by half (Balcerowicz et al., 2015, pp.122). Initially, many American drillers invested over the years expanding their investment; however, with such reductions, the country recorded decline in investment by more than $25 billion in the first quarter. In the first three months, the country showed signs of weakness in its economy, which contributed, to the anticipation of low GDP growth for the first quarter by the market (Jensen, 2011, pp.141). 1.1.2 International trade The U.S. is one of the most important economic markets, which offers both import, and export of products and services. Besides, the country cannot enjoy the growing economy, lift the wages of its citizens, and acquire the products it requires without engaging in international trade. More than 38 million jobs in the U.S. depend on trade (Riggs & Bonk, 2008, pp.172). Although few Americans know that the country is the largest exporter of products and services in the world, in 2014, these products, and services reached USD2.345 trillion as per the statistics of the Department of Commerce. Globally, there is a large amount of U.S. dollars circulating in the market reflecting the operational base occupied by the country about international trade (Winston & Rus, 2008, pp.286). After years of economic struggles, the country emerged among the best global trade policy-makers with its trade regulations constitutionally vested in the Congress. Moreover, the country is now partner to several international trade agreements including the International Trade Organization and General Agreement on Tariffs and Trade (Winston & Rus, 2008, pp.286).. Currently, the gross assets held by foreigners stand at USD16.9 trillion reflecting the level of engagement of the country in international trade. By the end of 2013, the products and services exported and imported by the country stood at USD2.27 trillion and USD2.74 trillion respectively (United States, 2010, pp.111). However, there was a trade deficit amounting to USD450.3 billion. In 2012, according to the statistics from the Census Bureau, exports of manufactured goods amounted to USD2.97 trillion, which supported approximate seven million jobs in the U.S. Whenever there is deficit in international trade, both the local companies and job seekers are affected. Despite the positive trends associated with international trade over the last two years, the slow growth of the U.S. economy since the inception of the current downturn is reflected is most of the values from its export activities (Jensen, 2011, pp.265). Just as the free trade among the 53 states creates numerous benefits, so does involvement of the country in international trade. Currently, the major trading partners of the country are Taiwan, Brazil, France, South Korea, Canada, Mexico, China, The United Kingdom, and Germany. 1.1.3 Investment indicators The most important indicator of the level of investment in the country is the employment rate. On the first Friday of each month, the U.S. department in charge of labour and statistics often release monthly employment reports, which indicate the current unemployment rates. Besides, the statistics also reflect the number of jobs gained or lost by the economy. Within the country, the market participants are always early waiting for these reports. The employee situation often influences several crucial indicators like consumer sentiments and confidence. Consumers make nearly 70% of the country’s economic activities; therefore, the state of the labour market is important to the overall performance of the economy (International Monetary Fund, 2012, pp.98). With less investment within the country, lesser jobs are created. Besides, the country has been able to strengthen its labour market through creation of conducive environment that attract foreign investors (Meng & Brennan, 2009, pp.119). Most investors also consider the GDP of a country before putting the investments in such countries since it determines the economic health of a country. Over the years, the states have been enjoyment positive economic growth, which attracts more investors. Higher GDP of a country reflects trade laws that attract international investors (Meng & Brennan, 2009, pp.121). The largest company in the U.S. is the Wal-Mart Stores that offer employment opportunity to more than two million citizens of the country. The store is a multinational retail corporation. It plays an important role in improving the economy of the country through employment creation and provision of taxes for economic development (Jensen, 2011, pp.143). 2.0 China 2.1 Macroeconomic performance Since the commencement of reforms in china in 1978, the country has been experiencing combined rapid growth with moderate stability in the prices of the products. Moreover, the country has experienced improvements in pace of its economic expansion and periodic expansion. China enjoys efficient and decentralized administration, elastic supply, and quality of labour force, higher levels of fixed capital investments, and the rising volume of savings that has been supplemented in the recent years due to the large flows of direct investments from foreign investors (Cette et al., 2007, pp.272). In the past 20 years, China has been experiencing rapid economic growth that stands at about 10%. However, in the first three quarters of 2012, the economic growth of the country has experienced significant decline, which to some extent has made structural production overcapacity become more serious. Such circumstances have made it difficult for most businesses to operate. In addition, most consumers and investors have strongly anticipated their pessimism (United States, 2010, pp.111). The Chinese government made a commitment of achieving a real GDP growth of not less than 8% annually to assist in maintaining social stability. Consequently, the country has been remedying the negative macroeconomic shocks associated with slowdown in the export growth and financial crisis in Asian through swift policy responses. In the first half of 2013, the economy of china developed towards the intended direction and generally performed well. Within the same period, other factors that experienced growth include consumption rates, investments, and industrial activities (Meng & Brennan, 2009, pp.245). The country registered a GDP of 17.28 trillion Yuan, consumer price index (CPI) registered 2.6% growth, and trade surplus of USD55.3 billion representing USD40.9 billion decline from the same period of last year (In-Wu, 2013, pp.153). 2.2 International trade The country has used international trade to bring new equipment and technologies to meet its domestic scarcities. In addition, the country is using exports as means of producing foreign earnings to pay for the imported goods and services. However, the government has resorted to maintaining an even balance of trade to enable the country pay for its imported products rather than buying on credits (Mansfield & Milner, 2012, pp.132). With the current population standing at 1.2 billion and the fastest growing economy in the world, most country refers to China as the market of all markets. As a result, it has been able to draw investments from around the globe at such a magnitude that makes it the second largest recipient of foreign capital after the U.S. The total volume of products exported by china is USD232 billion, which include its principal commodities like machinery and equipment, footwear, sporting goods, mineral fuels, toys, and textiles and clothing (Basu et al., 2007, pp.199). Of all the products generated from the country, the U.S. imports about 21%, Hong Kong 18%, and Japan 17%. The other export partners include the United Kingdom, the Netherlands, Germany, Singapore, and Taiwan. Over the years, China has been experiencing consistent trade surpluses (Siddiqui, 2007, pp.98). The growth of exported products is a major factor that has been supporting the rapid economic growth of the country. In 2013, China overtook the U.S. and became the largest trading nation in the world a factor that it described as a landmark of milestone. In 2014, the annual trade in goods of the country passed the $4 trillion mark for the first time after its exports rose from 7.9% to 2.21 trillion and imports rising as well to $1.95 trillion reflecting 7.3% (Siddiqui, 2007, pp.153). 2.3 Investment indicators In China, the major indicator on its performance at global level is its stable currency against the standard reference currency, the U.S. dollars. This is due to the decision made by the People’s Bank of China to devalue the Yuen. However, the downward pressure remained strong on the currency due to capital outflows, which forced the bank to step in and protect the currency. While the country is still expanding faster than any other global economy, several downside risks have emerged in the recent years. In addition, factors such as strong capital outflows, heightened volatility in the stock markets, and overcapacity in some sectors within the economy have the ability of putting a dent in the economic growth of the country (Eger et al., 2007, pp.279). Over the long run, the economic status of China might depend on the size of its workforce and the level of productivity. The combination of these two factors determines how much commodities China can supply without necessarily overstretching itself (United States. 2010, pp.121). The urban workforce in the country, which also produces most of the output, has been experiencing reduced growth with age groups forming these workforces shrinking as well. Therefore, demographic characteristics also play an important role in determining the investment indicators (McCusker & Thomson Gale, 2006, pp.175). On the other hand, little spending on the goods and services often result in the underemployment as most of the investors experience losses due to unsustainable production process. As a result, most people are laid off. The major company in China is Sinopec Limited that deals in oil and gas. It is state owned with revenue generation of 2.825 trillion with 358, 571 employees within the country (Basu et al., 2007, pp.132). 3.0 Australia 3.1 Macroeconomic performance Most countries are still suffering from the Global Financial Crisis. However, Australia economy appears to be spearing ahead considering the growth rate it experience. Recently, the Australian economy experienced slower growth as it resources declined. Australia had never experienced a fall in its GDP, and continued increasing consistently. Currently, its GDP stands at 12.5% higher than it was in 2008 (Basu et al., 2007, pp.231). Nevertheless, unlike most countries that suffered the global crisis, Australia not only embraced massive and timely stimulus package but also introduced austerity measure to protect its economy. The country slowly began withdrawing the stimulus measures a factor that contributed for the recent slowing down of its economic growth (Australia, 2004, pp.174). Currently, Australia is the twelfth largest economy in the world reflecting a better performance than the previous performance index. Over the past five years, the Australian economy has surpassed those of South Korea, Spain, and Mexico. Since the occurrence of the crisis, the Australian economy has been able to provide favorable conditions to property investments with low and stable interest rates. Moreover, the country enjoys strong and sustained growth in relation to its residential and commercial property prices, affordable cost of living, and long lasting trends towards the inner city. Integration of these factors with financial deregulations and intense competition the development of new loan products with advantages associated with taxes are some of the major reasons behind the renewal of the interest in investing in the Australian property (Ries, 2009, pp.168). The major factors supporting the higher GDP per capita of the country are the improvements quantity and quality of the physical and human capital. Furthermore, the GDP of the country was US$1.525 trillion as of 2014 (Balcerowicz et al., 2015, pp.116). 3.2 International trade Historically, the major trade partners of Australia were the Great Britain and the rest of Europe. Currently, the country majorly trades with Japan, the U.S., Singapore, and other Southern Asian countries. However, its export composition has remained the same but the new markets have been sought including South America and Middle East. The major export of the country include meat, cotton, wheat, machinery and transport equipment, iron ore, coal, aluminum, and gold. The largest destination for these products is Japan, which purchases goods worth USD9 billion while the U.S., which is the second largest purchaser, bought goods worth US$4 billion (Australia, 2011, pp.195). In relation to imports, the country imported nearly goods and services worth USD10 billion from the U.S. Other importers are Germany, China, Great Britain, Japan, South Korea, Indonesia, Taiwan, Malaysia, Italy, Singapore, and New Zealand. With the recent drop in the value of the Australian dollar against the U.S. dollar, the country experienced trade deficit (Shotton & Winter, 2006, pp.107). Devaluation of the currency means that the country’s products become cheaper while the imports more expensive. Figure 1: Australian International Trade Performance 3.3 Investment indicators Over the years, business investment in Australia has been able to increase from 12% of the GDP in 2001 to 17% in 2011. Furthermore, business investment has been the key driver of the business cycle within the country. Through expansion of the supply capacity of the economy, the investment also affects the long-term growth of the economy. The Australian economic resilience and potential plays an important role in offering safety, low risk environment, and associated benefits such serene. In addition, its economic freedom stands at 81.4 reflecting that it is the fourth freest economy in 2015 (Balcerowicz et al., 2015, pp.212). With the gains in the monetary and labour freedom, the country has been able to improve its freedom in relationship to investment, corruption, and control in government spending. As a result, most of the Australian citizens have been able to unlock their untapped potentials through investing in personal businesses a factor that reflects economic condition of the country. In addition, the country boasts of several international organizations operating within its boundaries due to stable political environment with well-established and transparent political activities. Besides, it enhances its investments through ensuring implementation of strong legal systems and professional bureaucracy that upholds ethics and integrity at all business levels. BlueScope is a company based in Australia and operates in several countries. The company deals in steel and offer employment to approximately 16,000 people with a revenue base of AUD8.622 billion. 4.0 Bangladesh 4.1 Economic performance The GDP of the country for the financial year the ended in June 30, 2015 was 6.4% reflecting an improvement in the economic growth. Despite its political agitation that affected its transport services, private investments, and exports, the country help up well due to its domestic demand, private sector wages, higher worker remittances, and public investments (Siddiqui, 2007, pp.152). In the financial year 2015, export growth rate was 3.3%, which was a reduction from the 12.1% in 2014. In the country, exportation of the garments contributed about 80% of the total export, which grew slowly by 4.1%reflecting disruption of the supply chains by political demonstrations. Figure 2: Effects of Market Liberalization in Bangladesh 4.2 International trade Bangladesh has been experiencing steady increase in its population. However, its international trade remains relatively small. Since Bangladesh does not have much diversified economy, its performance depends on the fluctuations of in economic factors within international market (Siddiqui, 2007, pp.199). Moreover, country’s government has been struggling to create a business environment that would attract organizations dealing in imports and exports, eliminate red tape, and introduce initiatives that would guide tax and financial principles. Between 2010 and 2013, Bangladesh’s export increased from USD1.671 billion to USD3.173 billion. The country also enjoys trade with major international traders like the U.S. where it exports 35.7% of its merchandises (Paratian & Torres, 2001, pp131). After the U.S., the country also enjoys trade with Germany, which is its second largest export with a proportion of the total products approximating to 10.5%, while the United Kingdom covers the third place at 8.3%. Bangladesh also trades with countries like Italy, Netherlands, Belgium, France, and Japan. The major products produced by the country are mainly agricultural products, raw materials and processed natural resources, and labour intensive manufactured goods such as clothing and textiles. 4.3 Investment indicators The country boasts of several investments opportunities associate with available natural resources and larger pool of labour available within the country. Between January and march, the hiring was decent in the country since the economy created about 591,000 jobs within that period which was lower than the 973,000 jobs created in the last quarter of 2014. The country has a mixed economy (Riggs & Bonk, 2008, pp.67). Moreover, it has been able to maintain a stable overall GDP growth rate, capital investment, higher levels of research, and moderate employment rates. Services-oriented companies with major focus on healthcare, retail, financial services, and enhanced agricultural activities dominate the economy of the US (Siddiqui, 2007, pp.174). Although services sector is the major engine of the economy, the country also has stronger manufacturing base, which accounts for 15%S output. Advanced Chemical Industries (ACI) is a company in Bangladesh and one of the largest producer of conglomerates. It manages an estimated revenue of ৳ 238 Million. 5.0 Comparison of the economic status of the U.S., China, Bangladesh, and Australia The Australian economy has experienced continuous growth over the years but with relatively low employment rates, contained inflation rates, and stable and financial system. However, the U.S. has the most technological and powerful economy that is large with a wider GDP of USD49, 800 (Riggs & Bonk, 2008, pp.117). The country also boasts of its market-oriented economy, which allows both business from the private sectors and private individuals to offer most of the decisions. Furthermore, both the federal and the state government buy the required goods and services predominantly among the private business entities (Guha-Sapir, 2013, PP.97). On other hand, China enjoys being the world’s largest exporter and stable economic base. It has been able to reform its private sectors, gradually liberalized the cost of its products, decentralized its fiscal issues, and opened foreign trade and investments. However, China faces several economic challenges like reduction in domestic savings and corruption practices. U.S. has experienced low employment rates and inflation compared to Australia (Riggs& Bonk, 2008, pp.215). Figure 3: GDP performance of the U.S. and China Despites the dampening housing market and increasing prices of oils associated with the drop in the value of dollar, U.S. experienced trade deficit due to failure to explore most of its potential resources and focusing on imported products. All the countries’ trade products range from agricultural to heavy machinery, however, the U.S. imports more products that China and Australia (In-Wu, 2013, PP.101). For years, the U.S. has been the major world market and contributor to the international trade activities. With the rising industrial base of China, it has been able to surpass the U.S. in relation to being the best player in international trade. Among the four countries, Bangladesh performed the poorest due to low investments in the country attributed to the problems associated with political differences. Conclusion The research focused on the various parameters determining economic performances of different countries. The paper reviewed the process and the extent to which economic performance, investment indicators, and international trade influence exports and imports. Over the years, countries like Australia and China experience growth in the economies. However, the investment indicators are less in both countries reflecting low employment, inflation rates, and stable financial systems. The U.S. majorly invests in technology that is attracting most of the investors. With such factors, U.S. enjoys a wider GDP than other countries. U.S. also enjoys its market-oriented economy that allows most private investors from local and international organizations to invest within the country. Although U.S. and Australia enjoys better financial base, China is the world’s largest exporter with major reforms placed on reforming private sectors, liberalization of the product costs, and decentralization of the fiscal issues. Bangladesh on the other hand experiences poor economic performance and international trade due to problems associated with political feuds. With adequate measures in place, economic performance, investments, and international trade returns are like to increase. References Australia. 2011. 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