Based on real time examples

1. GLOBAL Economic DOWNTURN

2. WHAT IS ECONOMIC DOWNTURN?
• An economicdownturn suggesttherate of economic growth is
slowingdown and possibly enteringinto recession.
• Key Features include :
 Negative or very low economic growth
 Rising unemployment
 Fallingasset prices – shares and house prices
 Low confidence and fallinginvestment
 Hight inflation.

3. China’s devaluation of YuanSeptember 2015

4. • China experienced s growth rate slowest in a quarter century.
• China’s slump spread across Asia as exports felland
consumers cut back on spending
• Yuan to a four-year low, as a result heralded a tidal wave of
cheap goods from Asian countries as they followed suit.
• Slowed down overall growth of world economy
Situation :

5. Reason:
• To maintianmonopoly in world trade.
• To boost its exports ininternationalmarket by providing
exporters witha cheaper currency.
• To maintainits competitiveness inglobal marketas a
manufacturer.
However, Chinawants to maintaina strong currency to prevent
capital outflows thatmay weaken the country’s economy further.

8. Oil and commodity price slump
2014 - 2016

9. • Globalmarketfloodedwithsurplus oil supply.
• BrentCrude price fellto$30/barrelinQ1 of2016 from$125/barrel in
mid-2014.
• Other commodities,likecement,aluminiumetc.pricesfalltoo.
• OPECsticks tocurrent production levels.
• Investmentin oil and gasexplorationand capacityexpansionfell.
• Victimsoffallin price include Russia ,Gulfand LatinAmericanstates.
Situation :

10. • Fall ingrowth rates of emerging markets.
• Rise in domestic oilproduction in western states.
• Unwillingness of OPEC members to cut production, amid
fears of market share loss.
• Introduction of Iranian oilafter sanctions being lifted.
Reason:

13. GREEK DEBT CRISIS
2010 - 2015

14. • Greek trade deficitand budget deficitrose to 15% of
GDP .
• Greece couldnolonger borrow to finance
itstrade andbudget deficits.
• Greek wages fell nearly 20% andunemployment rose
above 25%.
• Reductionin income andGDP, resultingina
severe recession.
Situation :

15. • Greece shut out from borrowing in financialmarkets.
• Greek fiscal mismanagement anddeception
increased borrowing costs.
• Widespread tax evasion.Statecollected less thanhalf of the
revenues due in2012.
• Governmental spending higherinnon-growthsectors than
growth-stimulatingsectors.
Reason:

17. Global stock downsurge
2015 - 2016

18. • Stock fall in China caused havoc in global stock market.
• The MSCI All-Country World Index, which measures major developed and
emerging markets, fell into a bear market, with its decline from early last
year now totalling more than20 percent.
• Chinagovernment intervention to prop up the market by buying shares the
following day did little to restore investor confidence.
• The circuit breaker wasplaced by chinese to temper the market but instead
caused a wave of selling of stocks.
Situation :

19. • Thedrop is linkedto poor growth and economic figures from
China.
• Sharp devaluationin the Chinesecurrency asa sign thatthe
authoritiesare becoming increasingly rattled about the
nation’s ailing economy.
• P/E ratioindicates thatmarket is overvalued, which made
stockholders very nervous.
Reason:

22. FUTURE OUTLOOK

23. 1) U.Sgrowth will remain solid
• Underlying fundamentals of the US domestic economy remain sound.
• Consumer spending has been increasing at a rate of around 3% overthe past year
and is predicted to keep growing at the same pace in2016
• There were three negative influences on the economy in 2015: an inventory cycle,
the collapse in energy sector investment, and the impact of a strong dollar and
weak global growth. Two of these will ease in the coming year.
• Thegrowth rate of the US economy can be expectedto remain in the 2.5–3.0%
range in2016, fairly decentfor a developed country.

24. 2) China’s economicactivity will decelerateeven
more.
• The past year was no exception, with 2015 growth expected to be 6.8%,
comparedwith 7.3% in 2014 and 7.7% in 2013. IHS predicts that China’s growth
rate will decline even further to 6.3% in 2016.
• Continuing problems (overcapacity, high debt levels, and low or negative rates of
return) in the heavy manufacturing, utilities, and mining sectors have been—and
will continue to be—the principal drags on theeconomy
• Change in the government’s one-child policy northe Chinese renminbi’s inclusion
in the IMF’s special drawing rights basket is likely to have a big impact in the near
term.

25. 3) Emergingmarketsremain in recession,other’s
growth will be a disappointment.
• The recessions in Brazil and Russiaare expected to last into2016.
• Those hit hardest are commodity exporters but countries like Saudi
Arabia, Kuwait, and theUnited Arab Emirates stay strong due to strong
reserves and better finances.
• Growth in most emerging markets willremain challenged by weak
global growth, fragile exchange rates, and low commodity prices.
• The prices of both oil and other commodities are expected to rise
gradually over next year.

26. 4) Global economy not likely to derail
• Neteffectofthe commodityrout on globalgrowth is positive.
• Assetbubblesand thepotentialforthemburstingare nota
significanthazard.
• Riskofevenslower growth in China is high,the impactson the
developedworldand commodity-importingemergingmarketsis
limited
• Bigoilshock, triggeredby an escalationoftheMiddleEast
conflictscould deraileconomy.