There are several factors that cause the world economy to be going down. This article will itemize those factors.

1. Higher Rates
When interest rates are low, it’s cheaper to borrow money. Since it doesn’t cost as much to borrow money, more money is available to buy goods and hire people. For this reason, low interest rates are designed to make a slowing economy grow.

When interest rates are increased, it costs more to borrow money. That means that businesses will not borrow as much in times of higher rates. When that happens, businesses spend less and hire less.

In turn, this slows down an economy and if the economy is already slow, it can cause a recession. Raising interest rates puts the brakes on economic growth.

2. A Stock Market Crash
The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly held companies take place.

Such financial activities are conducted through institutionalized formal exchanges or over the counter (OTC) marketplaces that operate under a defined set of regulations.

There can be multiple stock trading venues in a country or a region which allow transactions in stocks and other forms of securities.

Since the stock market is a vote of confidence, a crash can devastate economic growth. Lower stock prices mean less wealth for businesses, pension funds, and individual investors.

Companies can’t get as much funding for operations and expansion. When retirement fund values fall, it reduces consumer spending.

3. Falling Housing Prices and Sales
The housing market is closely linked to consumer spending. When house prices go up, homeowners become better off and feel more confident.

Some people will borrow more against the value of their home, either to spend on goods and services, renovate their house, supplement their pension, or pay off other debt.

When house prices go down, homeowners risk that their house will be worth less than their outstanding mortgage. People are therefore more likely to cut down on spending and hold off from making personal investments.

Housing investment is a small but unpredictable part of how we measure the total output of the economy.

If you buy a newly built home, it directly contributes to total output (GDP), for example through investment in land and building materials as well as creating jobs.

The local area also profits when new houses are built as newcomers will start using local shops and services.

A sharp drop in house prices adversely affects consumer confidence, construction and leads to lower economic growth. (falling house prices can contribute to economic recession).

4. Manufacturing Orders Slow Down
Manufacturing is the production of goods through the use of labor, machines, tools, and chemical or biological processing or formulation.

Manufactured goods are necessary for trade and this industry contributes trillions of dollars to the global economy. No other sector comes close to these numbers.

Manufacturing generates more economic activity than other sectors. The innovation found in the manufacturing industry has helped to increase economic productivity too.

Since the Industrial Revolution, the way we produce and consume goods has changed, and it’s an innovation that allowed (and continues allowing) the nation to become increasingly more productive in the services offered.

Manufacturing helps raise living standards more than any other sector.

If the manufacturing orders slow down, it could drag down related industries and disproportionately affect parts of the country where factories employ thousands of people.

5. Deregulation
Deregulation is the elimination or reduction of government power in a particular industry, usually enacted to create more competition within the industry.

The goals are to allow industries to operate businesses more freely, make decisions efficiently, and remove corporate restrictions.

However, the main objective is to remove barriers to competition so that particular industries can compete in the international market more easily.

One of the advantages of deregulation is that it stimulates economic activity because it eliminates restrictions for new businesses to enter the market, which increases competition.

Since there is more competition in the market, it improves innovation and increases market growth as businesses compete with each other.

But disadvantages are that without restrictions in place, small businesses are at a higher risk of being driven out of the market by larger, more established companies. The larger companies are capable of creating monopolies to take control of the market.

Also, customers are more exposed to fraud and excessive risk-taking by companies, social concerns are lost, and rural and other unprofitable populations are underserved. All of these have negative consequences on global economic growth.

6. Deflation
Deflation is defined as a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency.

Deflation can be caused by an increase in productivity, a decrease in overall demand, or a decrease in the volume of credit in the economy.

While deflation may seem like a good thing, it can signal an impending recession and hard economic times. When people feel prices are headed down, they delay purchases in the hopes that they can buy things for less at a later date.

But lower spending leads to less income for producers, which can lead to unemployment and higher interest rates.

Although it may seem helpful for the price of goods and services to fall, it can have very negative effects on the economy.

As prices drop, company profits decrease, and some companies may cut costs by laying off workers. Interest rates tend to go up in periods of deflation, which makes debt more expensive. Consumers and businesses often decrease spending as a result.

Deflation is generally less favorable and is associated with economic contractions and recessions. A deflationary spiral may turn hard economic times into recessions and then depressions.

7. Trade War
You must have heard of the US–China trade war over the past few months. This is one of the major factors which has the potential to impact world economic growth.

The simple reason why the US-China trade war is so important is that these are two of the biggest economies in the world. The combined trade activity between these 2 totals trillions of dollars, a significant portion of the total global trade.

The impact of the trade war on the GDP of the global economy in general and these 2 countries, in particular, can be severe.

8. Crude oil price
Crude oil is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth’s surface.

It is commonly refined into various types of fuels. Crude Oil is a major fuel used across a lot of industries that together comprise the global economy.

It literally uses to generate electricity, powers the transportation industry by way of diesel and jet fuel.

In a very basic sense, higher crude oil price increases inflation and impacts global economic growth. It would directly decrease the purchasing power and adversely affect household income and consumer spending.

9. Asset Bubbles Burst
An asset bubble occurs when the price of an asset, such as stocks, bonds, real estate, or commodities, rises at a rapid pace without underlying fundamentals, such as equally fast-rising demand, to justify the price spike. The bubble itself sets the stage for a recession to occur when it bursts.

source: https://sosgurus.com/

Hmm


If it gets to FP call me! Anyways check my profile to learn about Northern Nigeria