Professional Documents
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Activity 2
Activity 2
1
Foreign direct investment benefits the global economy, as well as investors and
recipients. Capital goes to the businesses with the best growth prospects, anywhere in
the world. Investors seek the best return with the least risk. This profit motive is color-
blind and doesn't care about religion or politics that gives well-run businesses,
regardless of race, color, or creed, a competitive advantage. It reduces the effects of
politics, cronyism, and bribery. As a result, the smartest money rewards the best
businesses all over the world. Their goods and services go to market faster than without
unrestricted FDI.
Individual investors have the potential to achieve greater portfolio efficiency
(return per unit of risk), as FDI diversifies their holdings outside of a specific country,
industry, or political system. Generally, a broader base of investments will dampen
overall portfolio volatility and provide for stronger long-term returns.10
Recipient businesses receive "best practices" management, accounting, or legal
guidance from their investors. They can incorporate the latest technology, operational
practices, and financing tools. By adopting these practices, they enhance their
employees' lifestyles. That raises the standard of living for more people in the recipient
country. FDI rewards the best companies in any country. It reduces the influence of
local governments over them.
Recipient countries see their standard of living rise. As the recipient company
benefits from the investment, it can pay higher taxes. Unfortunately, some nations offset
this benefit by offering tax incentives to attract FDI.2
Another advantage of FDI is that it offsets the volatility created by "hot money."
That's when short-term lenders and currency traders create an asset bubble. They
invest lots of money all at once, then sell their investments just as fast. That can create
a boom-bust cycle that ruins economies and ends political regimes. Foreign direct
investment takes longer to set up and has a more permanent footprint in a country.
3. Do you think the pandemic of 2020 hour change the global market landscape?
Explain
Definitely, even here in our country our economy suffered a lot how much more
globally.
The COVID-19 pandemic has spread with alarming speed, infecting millions and
bringing economic activity to a near-standstill as countries imposed tight restrictions on
movement to halt the spread of the virus. As the health and human toll grows, the
2
economic damage is already evident and represents the largest economic shock the
world has experienced in decades.
The June 2020 Global Economic Prospects describes both the immediate and
near-term outlook for the impact of the pandemic and the long-term damage it has dealt
to prospects for growth. The baseline forecast envisions a 5.2 percent contraction in
global GDP in 2020, using market exchange rate weights—the deepest global recession
in decades, despite the extraordinary efforts of governments to counter the downturn
with fiscal and monetary policy support. Over the longer horizon, the deep recessions
triggered by the pandemic are expected to leave lasting scars through lower investment,
an erosion of human capital through lost work and schooling, and fragmentation of
global trade and supply linkages.
The crisis highlights the need for urgent action to cushion the pandemic’s health
and economic consequences, protect vulnerable populations, and set the stage for a
lasting recovery. For emerging market and developing countries, many of which face
daunting vulnerabilities, it is critical to strengthen public health systems, address the
challenges posed by informality, and implement reforms that will support strong and
sustainable growth once the health crisis abates.
The pandemic is expected to plunge most countries in recession in 2020, with
per capita income contracting in the largest fraction of countries globally. Advanced
economies are projected to shrink 7 percent. That weakness will spill over to the outlook
for emerging market and developing economies, who are forecast to contract by 2.5
percent as they cope with their own domestic outbreaks of the virus. This would
represent the weakest showing by this group of economies in at least sixty years
3
exports in terms of value has a trade deficit. Conversely, a country that exports more
goods and services than it imports has a trade surplus. The formula for calculating the
BOT can be simplified as the total value of imports minus the total value of exports.
The integration of national economies into a global economic system has been
one of the most important developments of the last century. This process of integration,
often called Globalization, has materialized in a remarkable growth in trade between
countries.
Nations trade because they don’t produce all the products that their inhabitants need.
They import those that they need but don’t produce and export those that are
needed elsewhere.
To understand why certain countries import or export certain products, you need
to realize that not all countries are good at producing or are able to produce the
same products.
The cost of labor, the availability of natural resources, and the level of know-how
vary greatly around the world
Because of this, globalization arise and it’s a very important factor for an economy to
boost.
The first wave of globalization came to an end with the beginning of the First World War,
when the decline of liberalism and the rise of nationalism led to a slump in international
trade. After the Second World War trade started growing again. This new – and ongoing
– wave of globalization has seen international trade grow faster than ever before. Today
the sum of exports and imports across nations amounts to more than 50% of the value
of total global output.
5. Do you think a country can survive economically without trading with other countries?
Justify
Bibliography
https://www.worldbank.org/en/news/feature/2020/06/08/the-global-economic-outlook-
during-the-covid-19-pandemic-a-changed-world
https://www.dentons.com/en/insights/alerts/2020/march/11/covid-19-and-its-impact-on-
the-global-economy
https://hbr.org/2020/03/what-coronavirus-could-mean-for-the-global-economy
5
https://www.investopedia.com/terms/b/bot.asp
http://www.globalization101.org/the-trade-balance/
https://ourworldindata.org/trade-and-globalization
https://2012books.lardbucket.org/books/an-introduction-to-business-v1.0/s07-01-the-
globalization-of-business.html
https://www.wallstreetmojo.com/closed-economy/