Economic Impacts on Countries [Globalisation]

Positive

• As countries participate in the global economy through international trade, this enables their goods and services to reach a larger market.

• Countries may also receive foreign investments, which bring in capital and advanced technology.

• Foreign capital can be used to build production facilities, while advanced technology helps to raise the productivity of businesses and workers.

• The advanced technologies would make economic activities more efficient and productive.

• Coupled with greater demand from a larger market, there would an increase in production of goods and services.

• The country experiences an economic growth as there is an increase in the country’s gross domestic product (GDP) – the monetary value of all goods and services produced within a country over a period of time.

• The economic growth would result in the creation of more jobs, higher wages and increased tax revenue.

Negative

• Interconnections and interdependent relationships in a global economy can make countries economically vulnerable.

• The political, social or economic issues of one country can affect the economies of other countries.

• For instance, the flow of goods across the world was disrupted because of the Russia-Ukraine crisis. Russia and Ukraine are major exporters of food products such as wheat and corn.

• This food disruption resulted in a supply shortage that increased the prices of these food products elsewhere in the world.

• The increased cost of goods can lead to reduced trade between countries.

• Countries may reduce their demands for other goods and services, and even withdraw their investments from other countries.

• The gross domestic product (GDP) may decrease. In addition, the decrease in trade could lead to businesses closing down and workers losing their jobs.

• The tax revenue will fall and the country will have less financial resources to work for the good of society.