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4.1.1 Growing Economies - Coggle Diagram
4.1.1 Growing Economies
Growth rate of the UK economy compared to emerging economies
Economic growth = the increase in a country's productive capacity, usually measured using GDP
Emerging economies
Emerging markets have rapid growth but lots of risk
Investors like these markets as they grow quicker than mature markets, therefore they can increase profits and dividends
Some emerging economies have been grouped together by economists i.e. BRICS (Brazil, Russia, India, China and SOuth Africa) and MINT (Mexico, Indonesia, Nigeria and Turkey)
If emerging markets see a increase in incomes, it's likely the middle classes are expanding. Increasing incomes means consumers spend more on imports and domestically produced goods and services
Increased sales of domestic goods means more domestic firms grow, giving them more power and allowing them to compete internationally
If consumers buy imported goods from more developed economies it increases their profitability and makes the emerging market more attractive
The UK
In 2014 the ONS said UK products were more competitive than any other time
The UK has a strong and growing service sector whereas emerging economies produce mainly manufactured goods.
150 years ago the UK made manufactured goods that were exported across the world
Growing economic power of countries within Asia, Africa and other parts of the world
Most BRICS and MINT countries have experienced strong growth over the past few years, increasing their economic power
China had the largest economy in the world in 2015
It's growing economic power means it is one of the biggest inventors in other countries.
China's industrial power impacts all across South East Asia through supply chains and outsourcing
China drives the 'factory of Asia' due to bit's manufacturing
China has efficient suppliers and good infrastructure allowing for further growth, it also has access to lower labour costs
Consumers are spending more in South East Asia, increasing demand and helping local production and distribution
Central and South America and Africa are creating big international companies, they often have to find new ways to grow and develop because of China's dominance
The World Bank stated the largest economies include US, Japan, Germany and the UK
Around 70% of world GDP growth is likely to come from emerging market economies, with China and India making up 40-50%
Implications of economic growth for individuals and businesses
Trade opportunities for businesses
Where an economy is growing consumption may also be growing, which is good news for firms looking to invest or sell their products and services
With growth it's likely that disposable income is also rising
Incomes may also increase, increasing overall goods and services
Demand is likely to become income elastic providing greater revenues and profits
These goods and services can be produced domestically or imported, creating many trade opportunities
Employment patterns
employment is one of the most important indicators of the health of an economy
the employment rate shows the number of jobs that are being gained or lost across an economy
the amount of disposable income consumers have can determine how many goods they buy, when people are out of work they don't have enough disposable income to buy many goods.
therefore in areas with high unemployment it may be a bad idea to export there
however it may be good as unemployed people may be looking for jobs, so a business could find labourers to make goods that could then be exported elsewhere
the unemployment rate in the UK was 5.8% in 2014 a big improvement from 8% in 2009
In 2014 Greece and Spain had unemployment rates of 25% or above showing weaknesses in their economy, whereas China's has stayed at around 3%
future employment trends are also important, for example an increase in technology may mean fewer workers are needed to manufacture goods so having cheap labour may no longer be an advantage for emerging economies.
Indicators of growth
Gross domestic product per capita (GDP)
this is a measure of economic activity, including all of the goods and services produced in a year, divided by the number of people in the country
Figures for the UK are produced by the ONS
In other countries it's produced by multiple organisations, like the World Bank, international Monetary fund or another non-governmental organisation
this data may not always be comparable, consistent or easy to verify
GDP can be calculated to show the value of all goods either produced sold or purchased in an economy. they may take into account price changes, they may also be a reflection of an economy as a whole or of individuals (per capita)
often uses market exchange rates, derived in the foreign exchange markets these are constantly changing and so GDP can rapidly change over time
goods and services tend to be more expensive in high income countries and so GDP in those countries may overstate what people are actually buying
therefore people prefer to use PPP (purchasing power parity) exchange rates as it allows you to compare prices across countries as it's the price of purchasing a standard basket of goods
GDP figures may not mean the same thing and may have different implications in investment decisions this difference is often bigger in low income or developing countries
Literacy
the quality of employees in important both as workers and potential consumers
a company looking to invest in a country will need to hire a workforce
they will look for the most productive workers at the lowest cost possible
companies looking to export products will also want to look at potential consumers
the literacy rate is the % of adults that can read and write
when looking at literacy someone above the age of 15 is considered an adult
Health
an assessment of the health of a population may include
life expectancy at birth
infant and mortality
pollution exposure
access to clean water
the state of a country's health is an indicator of the level of development of an economy
The World Health Organisation collects and evaluates data relating to a broad range of indicators that can be used to assess population health, including the following
life expectancy and mortality
causes of death including communicable and non-communicable causes and injury
infectious disease
risk factors- sanitation, access to clean water, rates of breast feeding
health infrastructure and access to essential medicines
other factors such as overall health expenditure, immunisation rates, access to contraception and socioeconomic factors
Human development index (HDI)- combines statistics on life expectancy, education and income for any particular country into a single rankable value
Life expectancy
is how many years a person can on average expect to live
its an indicator of the health of a nation as well as it's health care and social systems
countries with the longest life expectancy = Japan (83.6), Honk Kong (83.4), Switzerland (82.4) and Italy (82.4)
countries with the lowest life expectancy = Sierra Leone (45.6), Swaziland (49) and Lesotho (49.9)
Mean years of schooling
helps assess average amount of schooling a 25 year old might have had though it doesn't consider the nature or quality of the education
countries with the highest = US and Germany (12.9), Australia (12.8), New Zealand/Israel (12.5) and Lithuania (12.4)
countries with the lowest Burkina Faso (1.3), Niger (1.4) and Chad (1.5)
Gross national income per capita (GNI)
shows the wealth of the population (measured in PPP$)
wealthiest populations = Qatar (119,029), Kuwait (85,820), Liechtenstein (87,000) and Singapore (72,300) poorest countries = Democratic Republican of the Congo (444), Central African Republic (588), Malawi (715) and Burundi (749)