The rich economies are weaker after the crisis

Financial Crisis
Financial Crisis

The rich world still heals the wounds of the deep recession caused by the financial crisis of 2007-09. This year might be the first time that all developed economies will be able to show positive growth since 2007. In May, the total employment in the U.S. returned to the levels prevailing before the crisis. By the end of the year, production in Britain will probably regain the momentum it had in early 2008. Nevertheless, the economies of the rich world are marching with slow steps, showing much lower growth rates compared to pre crisis levels. This pervasive weakness in growth will last for a little bit more, according to surveys. Since the beginning of the last recession, many economists feared that this would leave marks in developed economies. A deep recession could stifle investment, denying the possibility of development of the economies in the future. Labour markets may be trapped in a long term labor shortage, because the short term unemployed eventually will be displaced due to the reduction of their skills, as out of the scope of employment and lose their courage.

Financial Crisis

Financial Crisis

It is easier to assess the effects of the last recession as time passes. There are few economies that left the last recession almost invariant, such as Australia and Switzerland. Since last year, the potential U.S. GDP is 4.7% below pre crisis levels, Britain by 11% and Greece by 30%. By 2015, the loss in potential GDP of all economies of the rich world is expected to reach 8.4%. In many developed economies, the decline in potential GDP is almost as great as the decline in real GDP. If France could exhaust all possibilities of potential growth then the GDP would be 2.7% higher than the current levels. Again, however, it was 7.5% below pre crisis levels. Many economies, mainly in Europe, have suffered deep wounds in their structure that only ambitious reforms and ambitious investments can restore. With a pretty bad way, the crisis has weakened the growth potential of the rich world through multiple channels. From late 2007 until 2013, U.S. GDP fell cumulatively by 13.3% from pre crisis levels. The bulk of this decline (12.4%) occurred by the end of 2010. Both causes of this weakening evolved from provisionally years. Four main factors have led to disappointing growth rates: unemployment, lower labor market participation, the decline in capital investment and productivity.

Financial Crisis

Financial Crisis

Unemployment played the biggest role from 2007 until 2010, when the effects of the crisis were still severe. The weakening of employment and the reduction of working hours accounted for approximately 41% of the fall in GDP. By 2013, this figure had fallen to 22%. Low levels of participation in the labor market represent less than 10% of the decline in U.S. GDP by 2010, although the third is attributable to withdrawals due to age. The capital investment is still a thorn in the U.S. economy, as the participation in the weakening of GDP expands since 2010.

Financial Crisis

Financial Crisis

It is 13% below pre crisis levels, the housing market plays a leading role. While there is a retreat in investments in factories, equipment and copyrights. This disappointing trend is the reluctance of companies to take a risk in the medium term, making investments that will deliver in depth decade. The U.S. is one of the lucky cases. It is estimated that economic activity will soon reach pre crisis levels. In those countries, however, the demographic issue and the productivity is worse, the perception is much more pessimistic.

Financial Crisis

Financial Crisis

By Nicole P.

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