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Financial Economics UK Assignment Sample

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Added on  2020-07-22

Financial Economics UK Assignment Sample

   Added on 2020-07-22

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FINANCIAL ECONOMICS
Financial Economics UK Assignment Sample_1
TABLE OF CONTENTSINTRODUCTION................................................................................................................................3(1)Economic growth prospect of emerging markets and established markets.....................................3Oil price movement and how it might impact on UK’s economic outlook................................6Commodities price movement and how it might signal the world and the UK’s economicoutlook.........................................................................................................................................8Inflation and interest rate movement and its effect on UK’s business and economic outlook...9Foreign Exchange rates movement and its impact on the world and UK’s economic outlook162 Sector in which investment will be made for next 3 years.............................................................203 Company selected for portfolio and other elements that will be included in it..............................21CONCLUSION..................................................................................................................................23REFERENCES...................................................................................................................................24
Financial Economics UK Assignment Sample_2
INTRODUCTIONEconomics is the one of the important domain that have impact on the business firms andnation. In the current report emerging growth prospects of developed and developing nations isevaluated and in this regard some of the statistics like GDP and inflation rate are taken in toaccount. These figures for developed and developing nations are analyzed and economiccondition of developed and developing nations is identified. Apart from this, in middle part ofthe report oil price movement and its impact on UK economy is evaluated. Detailed study ofcommodity market is done in proper manner in respect to global economy and UK. Relationshipbetween interest rate and inflation rate is discussed in detail and UK outlook for future isestimated in respect to same. Foreign exchange rate and its impact on the world is analyzed interms of positive and negative sides of increase or decrease in values of major currencies ontrade at global level. At end of the report, specific sector that will be selected for investmentpurpose are identified and company within that sector in which investment must be made is alsoascertained.(1)Economic growth prospect of emerging markets and established markets Economic growth prospect is one of the important factor that need to be taken in toaccount while selecting any company or sector for investment purpose. In terms of economicgrowth nations are classified in to three categories namely developed, developing andunderdeveloped nations. In developed nations some of the countries can be taken like USA, UK,Germany, Canada, France and Italy. In developing nations category nations that comes are India,Philippines, Afghanistan and Bangladesh etc. In order to understand economic growth prospectsGDP of developed and developing nations need to be analysed. 3 | P a g e
Financial Economics UK Assignment Sample_3
Figure 1GDP growth rate of nations(Source: Real GDP growth, 2017)It can be observed that GDP growth rate of USA is 2.2% and same of UK is 1.7% followed byGDP of 2% is of Germany. Apart from this, in case of other developed nations like Canada,France and Italy GDP growth rate is 3%, 1.6% and 1.5%. This reveal that growth rate in case ofthese nations is very slow and developed economies are struggling to accelerate and maintaincurrent growth rate. As it can be seen that 2008 crisis hardly hit global economies. Governmentof developed nations make use of quantitative easing programs to bring economy back on trackbut still these nations are facing lots of problems in bringing stability in their growth rate (RealGDP growth, 2017). In order to understand global economic outlook along with developed nations it is veryimportant to understand economic prospects of developing nations. In case of India GDP growthrate is 6.7% which is slightly lower than same of China by just one point. GDP of Afghanistan is2.5% and same is 6.6% in case of Philippines. Apart from this, in case of Bangladesh GDP is7.1% which is higher than two major fast growing economies India and China. Nepal is another4 | P a g e
Financial Economics UK Assignment Sample_4
nation whose GDP grow at 7.5%. All these things reflects that developing nations are in muchbetter condition than developed nations. It can be said that in developing nations growth prospects are very high because theyhave some core competencies on developed countries like cheap labour and production as wellas high quality and large market where demand is on peak. Such kind of factors are attractinginvestment in developing countries and lead to acceleration in their growth rate.Figure 2Inflation rate of nations(Source: Inflation rate and average consumer prices, 2017)Inflation rate in case of USA is 2.1% and same in UK is 2.6%. In case of Canada inflation is only 1.6%. For France and Italy inflation rate is 1.2% and same is 1.4%. All these things reflect that in developed nation’s inflation rate is in control but low inflation rate cannot be always considered good for any nation. This is because if inflation rate declined then in that case situation of deflation may come in existence which may heavily affect nation economy. Apart from this, if inflation rate remain low then firms earning remain in specific range. Hence, it can 5 | P a g e
Financial Economics UK Assignment Sample_5
be said that developed nations are receiving advantage of low inflation rate but same also may create problems for them.In case of developing nations like India inflation rate is 3.8% and same is 3.1% in case ofPhilippines. Apart from this, for Bangladesh inflation rate is 5.7% and same in case of Nepal is4.5%. Afghanistan have very high inflation rate of 6%. Thus, clearly difference can be observedin case of developed nations and developing countries’ economies. It can be seen that inflationrate is high in these nations which to some extent can be considers good but if inflation ratefurther increase in these nations then same will not be good for them (Inflation rate and averageconsumer prices, 2017). Hence, it can be said that both developed and developing nations arefacing problem of inflation rate and there must be stability in rate. It can be said that growth prospects are bright in case of developing countries and infuture also this growth rate may accelerate and can benefit relevant nations. However, curbing ofinflation rate is very important because same have direct impact on growth rate of the nations.This is because if inflation rate is not in control then in that case price of the products andservices will increase and this will lead to lower demand in the market. This results in decline inproduction in the nation and this will lead to decline in growth rate of the nation.Oil price movement and how it might impact on UK’s economic outlookOn analysis of price movement of crude oil lots of hidden factors can be identified.Interesting that identified is that 2 to 3 years earlier crude oil price skyrocketed in the market butfrom 2014 to 2015 these prices declined sharply at fast pace. However, now trend get changedand crude oil prices again start rising from Q1 of 2016 (Metcalfe and Miles, 2012). However,this growth rate is not so high and it can be said that percentage growth in inflation rate is incontrol. Oil price movement have impact on the UK economic outlook. It can be observed thatsignificant oil price decline that was observed in 2014 positively affect UK economy as it can beseen that due to price decline some of the sectors like agriculture, air transport, coke, refinedpetroleum and manufacturing sector positively affected. In these sectors growth rate acceleratedwhich reflect that oil price decline lead to increase in UK economic activity. However, UK oiland gas sector to some extent negatively affected by decline in oil price. As due to reduction inoil prices relevant firms earn low profit in their business. However, in current time period oilprices are increasing consistently which may have negative impact on the nation economy. This6 | P a g e
Financial Economics UK Assignment Sample_6

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