Prospect of Growth in Major World Economies - Article Example

He has also analyzed the effects that the U.S economy which is on the verge of and perhaps already in outright recession will have on the general performance of the world economies but particularly to countries with which it trades heavily such as the economies of Canada, Mexico, the Caribbean among others.

A U.S recession in 2008 will harm the real GDP growth of the rest of the world. This will be especially so, in Mexico and Canada. In other countries which would otherwise be threatened by a U.S recession, measures including easing of monetary and fiscal policy would cushion them from the effects, however, it is still yet early to undertake any of the macroeconomic measures as a recession in the U.S is still just a prospect.

Some countries, such as Australia, China, and Sweden have already taken steps to curb any possibility of inflation, they have tightened their monetary policies. However, other countries such as Canada and the United Kingdom have eased their monetary policies in response to their weakening economic growth.

Most countries and currencies such as the Euro and the Yen have appreciated against the dollar. Whereas these economies to some extent are being affected by the financial turbulence in the United States, with the eurozone economies already showing slow growth, the appreciation of their currencies against the dollar impedes any chances of inflation. Japan’s weakening exports to the United States coupled with a decreased demand dampens any possibilities of an upsurge in GDP growth.

China’s economy continues to grow at an increasing rate, however with a high growth rate comes to the problem of inflation, therefore the authorities are being faced with the problem of inflation, and this is necessitating them to tighten their policies both monetary and fiscal. To do this, the best option is to appreciate their currency against the dollar and stimulate domestic demand, however, their authorities are not willing to employ this measure.

Real GDP growth for 2008 for industrial countries has been forecast to be 1.5 percent while for 2009, it is forecast to grow at a rate of 1.9 percent. For emerging market economies the general prospect is that their GDP will continue to grow albeit strongly even as those of the industrial countries slow down. Countries whose economies are heavily dependent on exports to the United States such as Mexico, the Caribbean as well as Central American countries and Asian economies are feeling and will continue to feel the spillover effects of the United States slowdown. However, the strong growth in domestic demand will sustain their GDP growth in addition to the rising demands for raw materials by key emerging markets economies, mostly China, which will help commodity prices strong and boast growth in many other emerging markets.

The article has covered chiefly the expectations and possibilities of what the author in his viewpoint foresees as being the case in the years 2008 and 2009. The information outlined in the article as it relates to strategic management is that it predominantly reflects the changes, risks, and uncertainties that cloud the world economy.

The article underlines the need for the strategic management process to allow room for changes, risks, and uncertainties in every decision made by an organization. It goes to reflect how the world economies are interconnected and therefore the need to thoroughly evaluate the external environment and monitor the performance of the general economy before any major decision is made at the organizational level. For example, the recession that happens in the United States affects an organization operating in Asia or southern America. This, therefore, calls for continuous observation of all external elements with which the economy is interacting.

Thus it is imperative that any strategic decision made be all-inclusive, taking into consideration economic variables such as inflation, domestic demand, rate of economic growth, and the economic performance of economies that are highly intertwined with their economy and industry.