90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
90-­‐738	  May	  2012	  -­‐	  Applied	  Economic	  Analysis	  II.	  Assignment	  1	  	  Thien,	  Do	  ttdo@andrew.cmu.edu	...
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The uk economy at a glance (1990 2010)


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The UK's economy at a glance (1990-2010) in comparison with the U.S and a developing country, Philippines.

The 6 major macroeconomic issues that UK is facing today and their rankings (based on their priority) are: GDP/PPP, Productivity, Recessions and Expansion, Unemployment, Inflation and Economic interdependence.

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The uk economy at a glance (1990 2010)

  1. 1. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         1   The U.K economy at a glance (1990 to 2012)The 6 major macroeconomic issues that UK is facing today and their rankings (based ontheir priority) are: GDP/PPP, Productivity, Recessions and Expansion, Unemployment,Inflation and Economic interdependence.Of all mentioned issues, GDP is the important indicator for measuring the countryseconomy. By 2010, the UKs GDP was UK US$2,261,710; nearly 1/7 that of the U.S, thebiggest economy in the world. Its PPP also lets us know more about the economy and itspeoples standard of living. By 2010, the UKs PPP was $US 35,636, this was about 1/3lower than the U.S and nearly 10 times higher than developing country Philippines. Asestimation, it will take the UK some 7 to 8 years to get to the current USs PPP. And itlikely will take Philippines will few more decades to catch up with the UK today.As a developed country, UKs productivity or GDP per hour work is quite high: $US 50.8,ranking 11 in the world; still its lower than that of the U.S; $US 59. (2009, Source:http://www.conference-board.org/). When look at Recessions and Expansions or ups anddowns of the economic growth rate we get another view for the country, which have a clearcorrelation with other indicators like Unemployment Rate and Inflation.During the period of 1990-2010, UKs most serious recession in 2009 also marked its yearof high unemployment rate (8%), extremely low inflation (1.65%), decreased PPP (from$US 35,885 to $US 34,473). This was in same landscape with the world financial crisis andwas illustrated clear with data of the balance of trade of the country. This Balance of trade(or Economic interdependence) is another issue of importance for the UK (especially whenthe world economies are more and more of a connected system that reacts and balances thecountries). Though UK doesnt belong to the EU, over the time, its trade balance showed itshuge deficit net export. This was not as serious as the US but with UKs size of economyits unbalanced enough and the country should pay more attention to this.Finally, theres a minor note regarding population growth rate. Although the worlds totalpopulation is rising rapidly, not all countries are experiencing this growth. With .4% UKspopulation isnt declining but its slowing. This might have more implications such as afalling birth rate and a rising life expectancy but in general, with this rate, there will bealmost no adding to labor force in the future. As population can have certain impact to theeconomy, the UK may want to do something to lift it up and to avoid a natural decrease inpopulation in the future.In short, UKs economy is one of the strongest economies in the world and its trend ofgrowing is up slope. With globalization and in todays world landscape, all economies areconnected and linked together, thus, macroeconomic issues becomes more significant. Thetime ahead will be a difficult time not only for the world but also for UK, it will have tofind solutions to reduce unemployment rate, maintain its current inflation (4-5%) andstrengthen its economic interdependence.
  2. 2. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         2   (Source of data: downloaded from WorldBank) POPULATION Figure 1. Populations of the U.S, UK and the Philippines from 1990 to 2020 (projection)Over the time of 20 years, UK remained the average birth rate of about .4% (between .2%and .7%) this was much lower than the U.S with 1.1% and the Philippines with 2%.By 1990 the population of the UK was about 57,248 mil people, by 2010 it lightlyincreased to 62,232 mil people and as estimation, if UK keeps this rate, by 2020 itspopulation will be some 64,823 mil people.Similarly, the US, with such rate will increase from 309,649 mil people to some 342,348mil people by 2020, adding some 32,999 mil people to its labor force.Philippines makes the biggest change in population; with this 2% of population growthrate, 19,117 mil Philippinos will be born by 2020 (equal to 20.4% of its population now);as big as 4 to 5 mega cities with population of 5 mil people each.
  3. 3. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         3  I. GDP Figure 2. GPD from 1990 to 2010In general, period time of 1990-2010 showed increasing GPDs for the three countries TheUK, The U.S and The Philippines. By the end of 2010, the biggest economy is the U.S withUS$14,586,700 mil; followed by the UK US$2,261,710 mil and Philippines, US$199,589mil.Though the three countries enjoyed a going up trend in GDP growth, the scenarios wereslightly different. Compared to 1990, by 2010 UKs GDP is $1,249 bil USD higher;whereas same number for the U.S is $8,835 bil USD and the Philippines is US$155 bil.However, growing sizes werent the same In 1990, UKs GDP was US$1,012,580 mil; after20 years, this has increased to US$2,261,710 mil or 2.23 times greater. This is a positivenumber but its not good enough as when compare the same for other two countries, wehave US with 2.54 times greater and developing Philippines with impressive 4.5 times (SeeFigure 2). Figure3. GPD ratiosComparing the three economies we have another result: in 1990, the size ratio foreconomies of UK : U.S : Phil was 1 : 5.68 : .04; by 2010, this has changed to1 : 6.54 : .09 (Figure 2). This is another indicator to show that the US and Philippines havebetter performance than the UK.In general, the UKs GDP is quite big but the country has the modest performance overtime in comparison with the U.S and the Philippines. The U.Ss GPD (2010) was 6.54 timeshigher than the UK and the trend showed that it will continue leaving the UK far behind. Ofthe three countries, the Philippines looks like a flat line but its performance was alsoimpressive (if UK ever had the same performance its result can be amazing!).
  4. 4. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         4  II. Standard Of LivingAccording to world HDI report (2011), the U.S and the UK were all in Very High HumanDevelopment countries group. The UK has the highest HDI; .91, followed it was the UK.with .86. The Philippines was recorded with .64, belonged to Medium HumanDevelopment group. For easier comparison, the mean HDI of the world was .66. Figure 4. UK, U.S and the Philippines PPPsNow we will look at the countries PPP, another indicator for standard of living. By 2010,the UKs PPP was $US 35,636, this is about 1/3 lower than the U.S with $US 47,153 andnearly 10 times higher than the developing country, Philippines with $US 3.969. Comparedto each own PPP by 1990, we see that all the three countries have managed to double theirPPP by 2010. Yet, as each country has different starting point so the gaps are huge.Compared to itself, after 20 years, GPD per capita of the U.S has increased by $US 24,115,while UK increased by $US 19,353 and the Philippines was way below both with $US2.216.In short, the standard of living of UK is fairly high and is tentatively growing higher.Compared to the U.S, the trend shows that it will take the UK some 7 to 8 years to get tothe current USs PPP; similarly it also will take the Philippines few more decades to catchup with the UK today. Figure 4. PPP ratios Why Philippiness GDP per capita has been doubled just as UK and the U.S but it GDPs line is increasing with greater angle? This is because of its higher growing rate of country population as showed in Figure 1, this is a reason why population can contribute greatly to the economy.
  5. 5. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         5  III. Short-term Economic Fluctuations Figure 5. Short term economic fluctuationsOver the time, two developed countries UK and the U.S seemed to have experiencedsimilarly close ups and downs. Since 1990, the UK has gone through 11 times of downfluctuations with the 2 most serious periods were in 1991 (-1.39%) and 2008-2009 (-4.37%) of GDP growth rate. Compared to its peak of 6.21% in 1997, it was quite a deepsinking.Meanwhile, being a developing country the Philippines had a higher average GDP growthrate, 3.8%, with less down fluctuations (7 times, greater variation), this country managed tomaintain a positive growth rate.This comes as a warning: the UKs short-term fluctuations were getting more and morevolatile over time. These short-term fluctuations of the UK can stun and slow down thegrowth of the country. It affects the GDP and may cost the country few years to climb upback to where it was before. Figure 6. GDP growth rate
  6. 6. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         6  IV. Unemployment Rates Figure 7. Unemployment ratesPhilippines had the highest mean of unemployment rate, some 8.9%. Over the time, itsrates have been changing between 7-12%. However in the last 6 years, while other twodeveloped countries rates climbed up, the Philippines has decreased and kept the rate aslow as 7 to 8%, the lowest recorded in its time.As mentioned the U.S and the UK had the average Unemployment rates of 5.8% and 6.7%over the time; however they were all climbing up toward the end of the period. (The twocountries lines were quite close).In details, unemployment rate of the UK reached its peak in 1992-1994 (10%), its thenlowered and the country successfully maintained it around 5%. But since 2009 its trend wasto climb up again to around 8%. This is not a good sign for at least 2 reasons. First, it had anegative correlation with GDP growth, in other words there were more and more peoplebecome jobless while the economy of the country kept going down. Second, the UK is adeveloped country with the mean rate of unemployment of 6.7% and its rarely reaching upto 2 digits like it is now. 8% might not be too bad for the Philippines but for the UK, its awarning sign. The UK should take action to reduce this rate.
  7. 7. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         7  In today financial situationV. INFLATION Figure 8. Inflation rateThe Philippines had the highest inflation rate of all. Over the time, its average inflation ratewas 7.49%, there was year that it jumped up to 22% (1998). However, as a developingcountry with developing economy this is unavoidable. Since 2000, the Philippines hasmanaged its inflation rate to under 10%.Over the time, the UK and U.S experienced a lower inflation with an average of 2.73% forUK and 2.27% for the US.I can say these inflation rates were fairly good putting in each country’s scenario.
  8. 8. 90-­‐738  May  2012  -­‐  Applied  Economic  Analysis  II.  Assignment  1    Thien,  Do  ttdo@andrew.cmu.edu         8  VI. Balance of Trade Figure 9. Balance of Trade or Net ExportThree countries all had trade deficits over the time.The Philippines, the smallest economy of the three had an almost flat line of Balance oftrade (as compared to other two). Year 1991 marked the highest point of Net export of thePhilippines with only $US -1361 bil, it was a hard year for the country with economicdownturn, high unemployment and inflation. On years with economic growth, the countrysnet export showed a bigger deficit.The U.S is clearly an economy consists of importing more than exporting; with low savingrate and huge consumption. Since 1994 the U.S has had a trade deficit year on year and theline got deeper and deeper until 2005. When the economy gets worse the consumptionshrinks and they import less. The chart implied that during period of 2005 -2009, the U.Shas decreased their import nearly by half (by $US 327,354 mil). This uplifted their balancetrade index.The UKs balance of trade remained quite flatter compared to the US but In difficult timeslike in 2009, the UKs balance trade index also tents to go up but as its interdependence isstronger, the changes werent showed clearly as the US.