Selected article highlights that Malaysian economy is expected to grow at a 5% growth rate as the export dependent nations is bracinag itself under the brewing trade war scenario between US and China (The strait times 2018). With the intensifying situation of trade war between the large nations like US and China is forcing the investors to flee from the emerging market thus the economy like Malaysia is facing deteriorated growth rate as compared to the 2017. Though the balanced budget will not be possible to be achieved, yet government is focused to meet the fiscal deficit this year.
Emerging economies among the third world countries owing to their labour abundance is gaining much amount of competitive advantage in producing goods and services compared to the developed nations. Thus, their growth are largely dependent on the bilateral trade with developed nations and regional trade. Under the intensifying trade situation, where large nations like US is implying tariff on the import from China and allied Asian economies, it is expected that it will showcase fall in the growth rate of the said economies (Guttmann 2016). As the result, economy like Malaysia is expecting fall in their growth rate because their export endeavours will be reduced and it will reflect higher domestic price, joblessness and fall in the overall growth of the economy.
Selected article highlights that headline inflation of Singapore during the present financial year has been enhanced by 0.6% as compared to the 0.4% inflation rate of previous year. The report also highlights that core inflation has also increased by a large extent during the present year, however, as per forecast, it is expected to slide down to 1.5% increase in third and fourth quarter. As per the MTI and MAS, impact of the consumer price will be moderate throughout the present financial year as the crude oil price moving higher it will lead to inflationary environment more complicated (Leow 2018). As another reason of the high inflation, selected article has showcased wakening currency of the economy that has making the importable costlier leading to rise in the inflation.
Inflation is one of the major macroeconomic factor that defines the general price level of the economy. As it can be seen that inflation of the Singaporean economy has been rising, it depicts, price level of the economy of goods and services is also rising. Deteriorating exchange rate and rise in the price of crude oil are the main reasons for the same because these factors has potential to increase the inflation (Aloui et al. 2018). Under high price of crude oil, transportation of goods and services became costlier and in case of fall in exchange rate, makes importable costlier. Though, depreciated exchange rate leads to higher export, however, under the present trade war scenario it has also been condensed causing overall price level of Singapore to rise.
Selected newspaper report highlights that government of South Korea during recent year has tried to reduce youth unemployment and over burden of work from the workers of the state. Thus, working hours has been slashed, however to keep the income intact, minimum wage has been enhanced. This presidential rule, rather than enhancing the employment, reduced the same and the income of the large amount of population has fell as well. Selected article highlighted that household income has fell by 8% for the lower section of the population, whereas it has reduced by 16% for the other population of the state (The strait times 2018).
South Korea is one of the emerging economy that gains large amount of employment through mobilisation of the same to the Chinese economy. However, under the deteriorating trade position of China, and slowing down growth rate of South Korea has caused the unemployment level of the state to rise exorbitantly; specifically in case of the youth employment. Thus, as the presidential election commitment, present Korean president brought in policy that has slashed the working hours while raising the minimum wage. Under the present situation, employment has reduced because firms are unwillingly to employ workers at higher employment and due to limited working hours, labours are not getting incentive through extra work (Bishop 2018). Both the lower and medium section of the population has lost their large amount of income showcasing the plan a complete failure.
Selected article highlights that the Singapore being an emerging market for the foreign investment has been facing rise in the investment during the present financial year. Singapore Savings Bond has become one of the popular place for the investment that has been facing exorbitant growth during the first two quarter of 2018 and as the outcome of the same, it can be seen that SSB application amount has crossed the 568 million dollar showcasing an enhancement by 2.3 time compared to 2017 figures. Removal of the top cap from the SSB has allowed the economy to gain higher amount of investment during the present financial year (Investsingaporebonds 2018). The article highlights that being sovereign backed and low risk asset, these has become one of the lucrative options for the investors.
Under the reduced trade proposition from the emerging markets, it can be seen that investment portfolio of the foreign investors is facing debacles during present date. Thus, SSB has arisen has a boon to those investors who want to invest in the economy of Singapore so as to gain higher return. SSB being a sovereign backed and low risk bond asset allowed the investor to invest more in the domestic economy of Singapore allowing the government a window to invest more in the infrastructural transformation program through which it is presently going. Enhancing financial and bond market of the state highlights that, by the end of present financial year, there will be a shift of the Singaporean economy from the export based economy towards self-reliant one (Lai 2018).
Selected newspaper report showcase that economy of Singapore is presently going through short term market crunch under the deteriorating trade situation. Inflation of the state is expected to fall 3.11% which is going to reduce the price of the goods and services to reduce. Under the trade war situation, fall in the inflation will allow the market to move further, however presently it is going through lack of demand under the higher inflation rate (Leow 2018). The report warns the domestic government regarding the faster normalisation of the US monetary policy that could leading to volatility in the financial market that will put pressure on the import based economies like Singapore.
Under higher volatility, investment in the market gets reduced and it leads to rise in the investment. This further enhance the investment in the next period reducing the liquidity in the market and reducing the aggregate demand as well. Economy of Singapore has been facing the same issue within its economic framework, where the inflation rate has been reducing, yet the danger of higher volatility in the market due to US monetary easing has been looming on the same (Arthur 2018). Under this situation, aggregate demand of the market is expected to fall that will reduce the growth prospect of the economy lower.
Conclusion
Above analysis has showcased that inflation, Growth rate of the economy and performance of the financial market are the factors that leads and economy towards prosperity in future date. Macroeconomic factors like unemployment, aggregate demand and fluctuation in the market are major factors that alter the growth path of an economy. Moreover, above discussion has showcased that, in open economy policy changes of one economy can lead to economic fluctuation in another economy too.
Reference:
The Straits Times. 2018. South Korea’s policies on wages, hours worked backfire for low-income workers.
The Straits Times 2018. Minister cuts growth projection to about 5%.
Guttmann, R., 2016. How Credit-money Shapes the Economy: The United States in a Global System: The United States in a Global System. Routledge.
Aloui, C., Hkiri, B., Hammoudeh, S. and Shahbaz, M., 2018. A Multiple and Partial Wavelet Analysis of the Oil Price, Inflation, Exchange Rate, and Economic Growth Nexus in Saudi Arabia. Emerging Markets Finance and Trade, 54(4), pp.935-956.
Bishop, J., 2018. The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss (No. rdp2018-06). Reserve Bank of Australia.
Lai, K.P., 2018. Connecting Asian Markets with Global Finance. International Financial Centres after the Global Financial Crisis and Brexit, p.154.
Under higher volatility, investment in the market gets reduced and it leads to rise in the investment
Leow, A 2018. Singapore cnsumer prices up by 0.6% in June on higher prices for food and services.
Leow, A. (2018). Singaporeans’ inflation expectations drop to 3.11% for year ahead despite trade war fears.
Invest Singapore Bonds. 2018. Singapore Savings Bonds Aug 2018 – Up to 3.11%pa Interest | Invest Singapore Bonds.
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