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Macro Econs in action- Drop in exports

Updated: Mar 20, 2023

A major economic headline for this week was how Singapore’s export carried on its downward momentum:



Similar news can be read about Korea and Taiwan. So clearly exports are going down, which means GDP growth will be subdued, or even negative. A recession seems imminent.


Linking this to the IB, A levels economics syllabus, what can we expect?


1. Central banks will try to depreciate the currency in order to boost exports (so as an investment, one could try to position more USD);

2. The government will provide tax incentive to boost consumer spending.

3. Longer term, the government will engage fiscal policy to attract new investment and broaden the economic base.


On (3), the level of engagement will also depend on analysis on the form of any upcoming recession. A structural and cyclical recession require very different aid.


Alvin

P.S: The Bank of Korea just announced yesterday on pausing its rate hikes. Friends planning to go Korea for holiday can perhaps wait a while before changing the Won.



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