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Economies research report - Coggle Diagram
Economies research report
Developed economy: UK
Currency:
The UK currency, the pound sterling, is known to be one of the strongest currencies in the world. However, Brexit weakened the British pound currency in 2019.
Top 5 UK imports:
Gems, precious metals: US$88.3 billion (12.8% of total imports)
Machinery including computers: $84.7 billion (12.3%)
Vehicles : $73.5 billion (10.7%)
Electrical machinery, equipment: $63.9 billion (9.3%)
Mineral fuels including oil: $56.2 billion (8.1%)
Top 5 UK exports:
Machinery including computers: US$73.3 billion (15.6% of total exports)
Vehicles: $50.7 billion (10.8%)
Gems, precious metals: $42.4 billion (9%)
Mineral fuels including oil: $41.4 billion (8.8%)
Electrical machinery, equipment: $28.5 billion (6.1%)
The UK is known to have a trade deficit as our imports exceed our exports as it's cheaper to import than to produce it in our own country overall causing negative balance of trade. This may be due to climate such as producing fruits or it may be due to better quality such as clothes.
Unemployment Rate:
The UK unemployment rate, at the end of 2020 was estimated at 4.9%, 1.2 percentage points higher than 2019. As the recession caused a spike in unemployment rates, the economy continues to operate below full capacity and inefficiently; this will lead to lower output and incomes. The unemployed are also unable to purchase as many goods, so will contribute to lower spending and lower output. This rise in unemployment can cause a negative multiplier effect.
Inflation Rate:
Since 2018 there has been disinflation from approximately 3% to 0.7% currently in the uk. The Bank of England uses monetary policy to aim for the Government's target of keeping inflation at 2% however due to coronavirus this has been difficult to achieve. Having a low inflation rate encourages firms to invest and consumers to spend especially during a recession in order to stimulate economic growth. However, a low inflation rate may mean people may put off buying things because they think prices will go down. If a large percentage of the population did that, it, could lead to more deflation or even disinflation in rare cases.
Interest Rate:
Currently the Bank of Engalnd has set the base rate of 0.1%. It dropped from 0.25% to 0.1% on 19 March 2020 to help control the economic shock of coronavirus. Lower interest rates help stimulate spending and economic growth as well as making it cheaper to borrow and pay mortgages. As there are more people unemployed and they have less disposable income to spend therefore making it harder to pay for things like mortgages.
GDP Growth rate:
During the first lockdown in March 2020, the pandemic led to the biggest fall in quartlerly GDP on record as GDP shrank by 20.4%. However in June 2020, GDP grew by 8.7% but still significantly lower than February 2020 (before the lockdown). The recession had reduced production meaning that less people were employed. Less employment meant consumers had less disposable income to spend on goods and services which further reduced the production rate further.
Developing economy: Bangladesh
Top 5 Bangladesh exports
Knit or crochet clothing, accessories: US$20.3 billion (44.5% of total exports)
Clothing, accessories (not knit or crochet): $19.4 billion (42.4%)
Footwear: $1.1 billion (2.4%)
Miscellaneous textiles, worn clothing: $1 billion (2.2%)
Paper yarn, woven fabric: $603.3 million (1.3%)
Top 5 Bangladesh imports
Machinery including computers: US$5.8 billion (11.5% of total imports)
Cotton: $5.4 billion (10.8%)
Mineral fuels including oil: $4.4 billion (8.7%)
Electrical machinery, equipment: $3.2 billion (6.4%)
Iron, steel: $2.9 billion (5.8%)
Currency:
Bangladesh's currency is currently stable and experiences little inflation or deflation however this has had an effect on their exports as they are losing competitiveness to neighbouring countries such as India and China. As other countries have experienced deflation in recent years which means they are able to pay workers less thus encouraging more globalisation and attracting TNCs to begin production in their country which overall boosts the economy and reduces unemployment.
Macro indicators
Unemployment Rate:
According to investopedia, economists believe that an unemployment rate below 5% suggests that an economy is very close to or at full capacity. Since 2017, Bangladesh's unemployment rate has declined steadily also resulting a decrease in poverty levels from 24.3% in 2016 to 21.8% in 2018. This had meant that more people were able to spend and increase consumption and AD, thus boosting economic growth. In addition to this, the government receives more income tax as more people are employed however it might not always be used for government spending as the government is corrupt.
Inflation Rate:
Bangladesh's current inflation rate stands at 5.29% and has somewhat been stable ever since 2003. Compared to the UK's inflation target of 2%, this is more than doubled, cosnidering it to be a high inflation rate. This has decreased the purchasing power from 14.8% in 2016 to 9.2% in 2019 despite the amount of economic growth.
GDP Growth Rate:
If consumer spending decreases which results in AD falling this would result in lower economic growth however this isn't the case for Bangladesh as their growth rate for 2019 was 8.2% according to the WorldBank. This is due to to their workforce size increasing in order to keep up with the increased demand for exports. As more workers are working and for longer hours this increases the country's GDP as well as productivity.
The Interest Rate:
According to TradingEconmics, Bangladesh's interest rate for 2020 stood at 4.75% and 4.88% in 2019 according to Statista. This high interest rate encourages Bangladeshi citizens to save rather than spend as the cost borrowing and the incentive to save has increased. Some will have less disposable income as it will go towards the high interest rates charged. This leads to less consumer spending and AD decreasing, slowing down economic growth.
sources:
https://www.investopedia.com/insights/downside-low-unemployment/
http://www.worldstopexports.com/united-kingdoms-top-10-imports
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=BD
https://tradingeconomics.com/india/indicators
https://www.macrotrends.net/countries/BGD/bangladesh/unemployment-rate#:~:text=Bangladesh%20unemployment%20rate%20for%202019,a%200.02%25%20increase%20from%202016
.
https://blogs.worldbank.org/endpovertyinsouthasia/what-can-bangladesh-do-deliver-more-and-better-jobs-everyone
https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/june2020
How coronavirus has impacted some macro economic objectives
