For the first time in years, the global economic outlook as viewed by the World Bank is much better than what was initially projected. Noticeable growth, along with harmonious economic expansion, has been observed in all regions around the world. Progressive economies like those in Japan and United States continue their upward trend while new markets have also been observed to improve a lot. Analysts predict that economic growth is seen to reach 3.1% this year and around 3% next year, with the biggest gains courtesy of first world economies. What could be the factors that contributed to this growth and how may it be sustained?
Economic Growth In A Nutshell
When there is an increase in the ability of an economy to produce goods and services within a particular time frame, it can be said there is economic growth. The most effective way of measuring this is by checking out the gross domestic product of a country while including every commercial item that was produced by that country. There are five major factors that can impact this growth.
Considered the most important of all assets any country could have, a balanced population play a very important role in the economy. Countries that invest hugely in their human capital have managed to produce an effective and labor force which such country can utilize within its borders. To illustrate, Singapore and Japan has always emphasized mathematics and science in their educational framework. The result is a much larger number of highly-adept white collar professionals who always produce high-quality output.
Perhaps one of the most important things that any country should have is sufficient physical infrastructure. Having adequate, top-quality and well-maintained physical infrastructure like roads, factories, and public transportation are top priority of advanced economies like Japan, Singapore and United States. One classic illustration of how such physical infrastructure can boost an economy is observed through the Japanese railway system. These railway systems transport more than two billion passengers and commercial freights amounting to billions of dollars annually. The ultra-modern and efficient railway infrastructure is one of the economic driving forces of Japan.
The technological development of a country is another crucial aspect that can impact its economic growth. In this age of information and digital technology, faster Internet services and fully automated banking and manufacturing sectors allow the country to become very efficient. Added to this, the creativity and innovation of its people in research and technology help the nation move forward into the digital age. Countries like Japan, Taiwan and Singapore continue to set their focus in this area, which is why they continue to grow at a faster pace when compared to their neighbors. Technology also helps narrow, and in some cases, close the gap between the citizens of any country, thereby creating an atmosphere of a more inclusive society. This helps improve such country’s human capital.
Natural resources like water, metals, plants, natural gases and oil, are very important assets that can impact a country’s economic growth. Since this area usually depends on the geographical location of the country, it can be said that some nations in the Asian region have more compared to their neighbors. For instance, Japan may be the most advanced country in Asia in terms of technology but it has to rely on other neighboring countries to fuel its industry. Indonesia may not be technologically advanced but its abundance of coal deposits allows it to export the mineral to other countries, which then helps its economic growth. Water and natural energy are also very important assets to a country and can hugely impact its economy.
Stable Political Structure
Finally, one of the major factors that could affect the economic growth of a country is its political stability. In 2014, the political turmoil in Thailand scared investors and not only almost crashed the economy of the kingdom but also sent ripples across the region which pulled down many countries’ stock markets. Capital flight was also observed during the years leading to the 1986 EDSA revolution in the Philippines, draining the country’s coffers and almost plunging it to chaos. Improper government policies, particularly in the area of tariffs and trade, as well as corruption in government, can also greatly impact its economic growth. Such environment is viewed by investors as unfriendly and would often stay away from these countries. When investor confidence is lost, the government of such country will have a hard time managing the first four factors already mentioned, which often result in an economic slowdown.
While there are also other influences that can impact the economic growth of a country, the five factors listed above are considered the most important of all. It is therefore very important to constantly monitor these areas as any small changes could affect the country’s growth in economic terms.