Copyright 2007 – Biz/ed External Shocks to the Global Economy
Copyright 2007 – Biz/ed External Shocks to the Global Economy
Copyright 2007 – Biz/ed Energy Costs
Copyright 2007 – Biz/ed Energy Costs Rising oil prices affect many businesses worldwide Change the nature of demand (e.g. off-road vehicles) Potential to generate inflationary pressures Possibility of triggering global economic slowdown
Copyright 2007 – Biz/ed Famine
Copyright 2007 – Biz/ed Famine Succession of poor harvests can lead to famine conditions Attempts to grow food to meet increasing shortages can lead to environmental degradation Impact on global economy of dealing with aid problems and the social issues that come with it – refugees, for example Lack of access to world markets by developing countries
Copyright 2007 – Biz/ed Share Prices
Copyright 2007 – Biz/ed Share Prices Share Prices reflect the expectation of future financial performance A belief that prices may fall in any area of the world is sufficient to trigger global market changes The share market is now 24-7
Copyright 2007 – Biz/ed Economic Policies
Copyright 2007 – Biz/ed Economic Policies Interest rate changes anticipated across the world The global capital market means such changes can have significant impacts Alan Greenspan – Chairman of the Federal Reserve – seen as being one of the most powerful figures in the world because of the influence he has on US economic policy Expansionary/contractionary policies in major economies can influence smaller economies around the world
Copyright 2007 – Biz/ed Domestic Policies Trade Protectionism – for example, the US tariff on steel Regulation – impacts on trade patterns Trade Blocs – NAFTA, EU
Copyright 2007 – Biz/ed Uncertainty
Copyright 2007 – Biz/ed Uncertainty One of the most significant of the factors affecting the global economy Business does not like uncertainty! Affects future planning and investment
Copyright 2007 – Biz/ed Uncertainty Can include: –Corruption/fraud – Parmalat, Enron – causes loss of faith in markets –Political change – Iraq, Zimbabwe, South Africa, China –Rumour –Payment default – Russian Bond Crisis –Collapse of major industries – shipbuilding, coal, manufacturing, etc.
Copyright 2007 – Biz/ed War
Copyright 2007 – Biz/ed War War increases uncertainty and leads to potential economic dislocation The Middle East and conflict in Africa being two such cases
Copyright 2007 – Biz/ed Natural Disasters
Copyright 2007 – Biz/ed Natural Disasters 1906 – earthquake in San Francisco – the city lives in the shadow of another quake, which will happen sometime – what will be the global effect?
Copyright 2007 – Biz/ed Natural Disasters Natural disasters can affect resource allocation and availability and also create massive economic dislocation Temperature extremes can destroy crops and lead to global shortage