Where will the second recession hit?
Even as countries across the world are trying to pull themselves out of the impact of the recent global recession, observers and economists are predicting a second depression in the coming months.
While the United States caused the last recession, the epicentre this time is the European debt crisis. As Asian shares also begin to plummet, it is time for developing countries to rethink the sustainability of their economies.
According to Satish Kantheti, the joint managing director of Zen Money, Greece, Spain, Portugal, Ireland, Argentina and Brazil are among the countries that will first face the consequences of the second recession while the United States and Japan will experience the worst. The logic is simple. The financial systems are connected mainly through trade ties. As Europe takes the hit of the phenomenon it caused first, the ripple effect will affect its trade partners, the major players being United States and Japan.
“The extent of damage in Europe, US and Japan will also be fuelled by the ageing population while the working demographics in emerging markets like India with more youth will stay relatively immune,” he says. Kantheti adds, “However, India does need to be careful as foreign inflow of money will come down and the scope of growth will be hampered.”
In terms of sectors, IT sector and economy-sensitive segments such as metals that are directly affected by international prices, will be hit the hardest.
Prabaker Dhulipudi, the director of Finmart Solutions Pvt. Limited, says China will be affected due to its dependence on manufacturing. India need not worry as much. “India has a longer sustainability due to strong infrastructure. However, the country will get hit as the IT sector will take a direct impact.”
Also echoing the financial experts is a young entrepreneur. Anup Thati, 23, managing partner at Tranquil Properties, names China and Japan as the countries that will bear the maximum impact. “The devastation the double dip is going to cause in Japan is going to be similar to the nuclear strike on Hiroshima. The nation might be forced to rebuild itself all over again. China will also be among the worst hit as it depends heavily on manufacturing.”
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