Day 15: Globalisation

Interesting facts and statistics:

• Japan has the third largest GDP in the world.
• Luxembourg, Switzerland and Macao SAR are the top three countries with the highest GDP per capita in the world.
• Emerging markets(developing nation that is becoming more engaged in global markets) and developing economies hold 59.65% of world GDP.
• The top 9 fastest growing countries in GDP are mostly in Africa and Asia.
• The IMF predicts that advanced countries will be hit harder(-6.1%) by the pandemic than developing countries(-1%) and that advanced countries will bounce back(4.5%) slower in 2021 than developing countries(6.6%).

Emerging Market Country: Indonesia

Indonesia is now the largest economy in South-East Asia, the 16th largest economy in the world by nominal GDP and the 6th largest in the world by GDP PPP. Indonesia’s market economy is reliant on its domestic market and the government’s intervention.

How Indonesia has grown: Indonesia suffered from the 1997 Asian Financial Crisis, but its bounce back and growth into one of the world’s largest economies has been impressive. Their growth has been down to their government intervention and the twenty year plan. The government has had a huge hand in the economy as they own many major enterprises, 141 to be exact. Since the 1997 financial crisis, the government took control of a big portion of private sector and corporate assets so that they can benefit the economy how they see fit. In 2005, a twenty year plan, ending in 2025, was drawn up that segmented in 5 year medium plans. Each 5 year plan had different development priorities, and by carefully following this plan, Indonesia escaped poverty following the Asian Financial Crisis. The 5 year plan focusing on infrastructure development, healthcare and education will be ending this year in 2020. the final plan will have the goal of boosting economic competitiveness in Indonesia, and increasing output. The past plans have been carried out thanks to long standing energy subsidies, allowing for investment in programs for the poor. The subsidies have kept prices low, meaning that goods are more affordable. In the 2008 financial crisis, Indonesia was set back, however, their plan has remained a success up until now as it moves into its final 5 year stage.

Growth and Development Statistics: Since 1999, Indonesia has cut poverty by more than half to 9.4% in 2019. Since 2004, Indonesia’s GDP growth has remained above an impressive 5% for the most part and climbed up to 6% in 2007 and 2010. In 2019, GDP growth sits at 5% and the GDP in 2018 is just above 1 trillion US dollars.

Current problems: However, Indonesia must not get carried away. they still have a ways to go before achieving their goals. 25 million Indonesians out of the 267 million are still in poverty as of 2019. Also around 20% of the population is vulnerable to falling back into poverty. One in three children under the age of 5 suffer from stunting, which affects the economy in the future eg workforce. Healthcare is still not widely available at a high level. Indonesia’s GDP per capita is still just under 12302 US dollars, showing that the income levels are still not where they should be.

Projected and Hoped For Growth and Goals: In terms of future projected growth, Indonesia’s internet economy is expected to cross the $130 billion mark by 2025. Their GDP per capita in 2020 predicted by the IMF should be 14000 US dollars. On top of this, the current president of Indonesia has just promised to put in place another plan that will end in 2045. By then, he hopes that Indonesia will have a GDP of 7 trillion US dollars and an annual GDP per capita of 320 million US dollars. This would mean Indonesia will be one of the top 5 world economies.

Rapidly Growing Country: Ghana

Ghana is a country in West Africa, rich in natural resources, tourist locations, biodiversity, nature and culture. They are one of the countries rapidly economically developing into an advanced country and their recent growth has been noticeable among the countries of Africa.

How Ghana Has Grown: Ghana’s government has increased government spending in recent years, leading to stimulated growth, and boosting Ghana to one of the fastest growing economies in the world. On top of this, the Ghanaian government has set up many programs to increase growth in certain key areas of the economy. The major project was Ghana: Vision 2020, which aimed to develop Ghana into an advanced first world country. Their have been many individual plans and programs to try and achieve Ghana’s vision for 2020. For the agriculture industry, there have been the Planting for Food and Jobs, Rearing for Food and Jobs, and Planting for Export and Rural Development programs. The Business Regulatory Reform program set up by the government is meant to improve the business environment. Ghana also has also grown very well through exports. The most notable of which are oil, gold and cocoa. There are no shortages of these materials as Ghana is a nation rich in natural resources. The launch of Ghana’s crude oil production began in 2011 on the Jubilee Field and at the same time, the gold and cocoa exports were booming. The culmination of these two events led to a very high GDP growth peak of 14%, making Ghana the fastest growing economy in the world at the time(2011). Then in the following year, the GDP growth was at 9.3%. The continually rising oil and gas production is leading to lots of investment from abroad(FDI: Foreign Direct Investment), further strengthening the economic growth of Ghana. Ghana is Africa’s top FDI recipient. Ghana is also seeing high growth in the industrial industry(10% annual growth on average in the last three years) and the agriculture industry. Overall since 1996, Ghana’s plan called Ghana: Vision 2020 which has tried to half poverty, increase economic growth on all fronts and raising living standards hasn’t been a complete success, but the targets were very ambitious and Ghana can be proud of the tremendous growth they half achieved in recent decades.

Growth And Development Statistics: Ghana’s growth has led to a significant increase in GDP per capita. In 2005, Ghana had a GDP per capita of 491 US dollars, but after a rapid increase, in 2019, Ghana had a GDP per capita of 2200 US dollars, showing their improved living standards. Ghana has reduced the poverty rate by more than thirty percent since 2005. They have also seen a 6.3% GDP growth in 2018 and since 2005, the GDP growth rate has only dipped below 5% for 3 years. The non-oil economy in Ghana has grown around 5% every year in recent years, showing that the economy is slowly shifting to be less over-dependent on the oil market. Ghana was the sixth fastest growing economy in 2018 and was 18th in 2019.

Current Problems: Ghana is seeing the government running a large fiscal deficit as the government spending has been increased for subsidies and public sector wages. The fiscal deficit in 2012 was 11.5% of the GDP and the public was in debt 56% of the GDP, showing that their growth has had a cost. Debt to foreign countries has been increased due to the government also running a significant balance of payments deficit. Also, gold, oil and cocoa make up for 75% of their exports, meaning that the economy is heavily reliant on this trade. If anything negative were to happen to these markets, Ghana’s growth could be in trouble. Ghana is vulnerable to trade shocks. Ghana’s energy sector is in bad condition due to excess power capacity and the government will need to give firms money, further increasing fiscal deficit. However, in 2019, the Energy Sector Recovery Plan lasting 5 years will begin to fix the sector. Furthermore, despite Ghana’s reduction of poverty, it is still a major problem within the country as in 2016, 56.9% of the population is earning under 5.5 US dollars a day. Lastly, Ghana has one of the weaker currencies in Africa, leading to high interest rates(average of 17.83% from 2002 to 2020) trying to strengthen exchange rates, which get in the way of growth.

Projected And Hoped For Growth And Goals: Ghana is expected to see a slow down in GDP growth, just like the rest of the world will due to the corona virus crisis. Ghana’s government has just set up a plan that will end in 2080: the National Adaptation Plan. This will try to shift the economy to be more environmentally friendly, therefore reducing the negative impacts of climate change. Ghana also has the Sustainable Development Goals which will try to end hunger, improve income and living standards and help the country move towards further advancement and economic success.