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Syllabus Topic
HSC Topic One - The Global Economy
International economic integration
the international and regional business cycles
The business cycle refers to the periodic fluctuations in economic activity, typically characterized by periods of growth (expansion) followed by contractions (recessions). These cycles are influenced by various factors, including global trade, investment flows, and geopolitical events. Understanding both international and regional business cycles is essential for businesses and policymakers to make informed decisions.
THE INTERNATIONAL BUSINESS CYCLE
The international business cycle reflects the combined economic activity of countries worldwide. It is shaped by factors like global trade, financial markets, and interconnected supply chains. For example, the COVID-19 pandemic caused a sharp global recession, shrinking the world economy by about 3.4%. However, the recovery that followed was uneven. While advanced economies like the U.S. and EU rebounded quickly, developing nations, particularly in Africa and Asia, faced slower recoveries due to limited access to vaccines and fewer fiscal resources.
In 2024, the global economy is facing several challenges. Inflation remains a major issue, driven by rising energy prices and supply chain disruptions. The ongoing war in Ukraine has also contributed to volatility in global energy markets, affecting countries worldwide. The International Monetary Fund (IMF) forecasts global growth to slow to 3.0% in 2024, a sharp decline from the rapid rebound of 2021. Advanced economies, particularly in Europe and the U.S., are grappling with higher inflation and rising interest rates, raising concerns of a potential stagflation scenario—where high inflation and low economic growth occur simultaneously.
REGIONAL BUSINESS CYCLES
While the international business cycle captures global trends, regional business cycles focus on specific geographic areas and are influenced by local factors such as government policies, resources, and demographics. For instance, in the Asia-Pacific region, major economies like China, Japan, and India are seeing divergent economic paths.
China’s economy, the second largest in the world, is facing slower growth in 2024. Factors such as a cooling real estate sector, an aging population, and tensions in global trade have contributed to this slowdown. Growth in China is expected to be around 4.8% in 2024, significantly lower than pre-pandemic growth rates of 6-7%. In response, the Chinese government has introduced stimulus measures, including interest rate cuts and infrastructure investments, to stimulate domestic demand.
Meanwhile, India’s economy is showing stronger performance. With a young and growing population, India is poised to become the world’s most populous country in 2024, which offers significant potential for economic growth. The Indian economy is expected to grow by around 7% in 2024, driven by strong domestic consumption, a rapidly expanding digital economy, and government policies aimed at improving infrastructure and business climate.
In contrast, Japan’s economy faces its own challenges, including a shrinking labour force and low productivity growth. Despite government efforts to stimulate the economy, Japan’s growth in 2024 is projected to remain modest, hovering around less than 1%.
CONCLUSION
The global economy in 2024 is marked by uncertainty, with a mix of slow growth, inflationary pressures, and geopolitical risks. While the international business cycle is slowing, regional cycles show diverse trends. Economies in Asia, especially India, are outperforming others like China and Japan, which are grappling with structural challenges. Policymakers and businesses must stay agile in navigating these cycles, adapting to the changing global economic landscape.
SOURCES:
International Monetary Fund (IMF): World Economic Outlook
World Bank: :Global Economic Prospects
Asian Development Bank (ADB): Asian Development Outlook
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