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Global economy or what people generally call it as the world economy is the economy of the world, where goods and services exchanged internationally are expressed in monetary units i.e money. As predicted by World Economic Outlook (WEO), the global economy is on rise and is projected to grow faster in 2017 and 2018. The reason for this is the increase in trade, industrial production and consumer confidence.Although the forecast seems to be positive but still there are some short term and medium term risks to the global economy. One of the major risk in the next two years is the slowdown in the emerging market economies (EMEs). Emerging markets account for almost two thirds of global GDP in purchasing power parity (PPP) terms but in the recent years, there is declining growth in EMEs and there are several causes for that which vary from country to country. The impact of this decline can be seen all across the globe. For example:  China is the second largest contributor in the world economy by nominal GDP and has a huge manufacturing sector  that exports goods consumed around the world. Any slowdown could have a negative impact on the GDP growth of the countries like Australia, Brazil, Canada and Indonesia that are dependant on commodity exports as demand will slow down. In several other economies, the slowdown has exhibited structural hindrances with respect to decreasing capital accumulation, productivity growth and unfavourable demographic trends. Declining growth in EMEs also leads to a sharp slowdown in external demand which in turn effects the countries with both sizeable trade exposures and large current account deficits. In addition to this, an orderly but widespread slowdown would reduce asset value and lower investments in the emerging markets.All these challenges have already created a significant negative effect on global growth and with continued slowdown in the EMEs, the next two years could have a major adverse impact on the global economy affecting developing as well as developed nations.The financial turmoil in emerging market economies (EMEs) also has an adverse impact on european nations as within european nations, several countries have large exposure to EMEs. For example, Germany (one of the largest euro area countries) has strong trading ties with the Emerging Market and Developing Economies group and is thus highly exposed to the structural and cyclical weaknesses within these economies. These external impacts are currently negative, as growth in exports to emerging markets is continuously decreasing and is now much weaker than demand from developed economies. Thus, German companies are facing higher export risks which in turn can negatively affect their growth. For example, Germany delivers almost 29% of their total exports to emerging markets. One fifth of these exports are shipped to China, which means that Germany is more exposed to external risks stemming from emerging markets than other european nations. The key sectors that more prone to risks because of the slowdown in emerging markets are the automotive, mechanical and electrical sectors. In addition to this, cyclically-sensitive chemical industry is also vulnerable to the risks. In response to the negative effects of emerging market economies on the german trade, the government is changing the growth model and is making the internal demand (private consumption sector) as the main driver for growth. Earlier private house used to spend very less and did not contribute much to GDP growth. The main reason for this was the weaker performance by Germany’s labour market in earlier times but now the private sector is rising again and there several factors causing this. Firstly, Germany’s labour market is booming. The level of employment is the highest since Germany’s reunification and the prospects are very good with labour demand climbing to all-time-highs. Germany’s healthy labour market can be linked back to legislation which has improved flexibility and increased the possibilities for part-time and temporary employment. This has, in turn, led to important first steps into full-time employment for the former unemployed. In addition, there has been an increasing need for skilled workers, due to the strong demand for German products from abroad, while labour unions and employer associations have worked cooperatively together. The healthy labour market is supporting the bargaining power of unions and growth in wages is quite dynamic. As a consequence, prospects for real income have improved significantly. In addition to this, public transfers to over 1 million refugees is also supporting private consumption. Financial obligations for projects regarding the accommodation and integration of refugees are also increasing the average demand.Overall from a macroeconomic perspective, a robust and dynamic internal demand is playing a major role in providing shield to German economy and protecting them from external influences.Coming from a family business of automotive spare parts in India, I can relate to how the business is affected by the slowdown in emerging markets. India is itself an emerging market  but unlike other countries, currently India’s economy has been growing at impressive rates. For example, slowdown in China has dropped the prices of spare parts and it has become cheaper to import automotive parts. At the same time, lower prices of these products are helping India to keep its current account in check and also reduce input costs. In addition to this, “Make in India” initiative of current Prime Minister Narendra Modi has shifted the focus to manufacture in India and thus India’s manufacturing sector is becoming a good option for investors who are interested in developing markets. India is a land of 1.3 Billion people and world’s largest youth population. The internal demand is increasing at an exponential rate and in order to cater to this, a large amount of input and finished products are required. This in turn provides internal business opportunities and generates employment to a large number of people. This helps in protecting India from external factors as the supply within India can generate huge profits. We as automotive spare parts manufacturers shifted our focus towards rural sector and are supplying quality spare parts at affordable rate as the input cost of material procured from China has decreased. Overall, India’s automotive sector stands out as a relatively bright spot and is not affected by the slowdown in emerging markets booming because of its stable macroeconomic conditions, renewed policy momentum, and a business-friendly government.

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