Question

Please evaluate the country's economic environment assuming your firm is considering the investment for the first time in the country.

Country Utopia’s economic indicators of the year 2019

GDP= US$ 1 trillion, GDP/capita= US$ 12,000, GDP growth rate = 5%, GINI coefficient=0.5, unemployment= 4% Inflation=5%,

Current account (3years) shows slightly negative; Capital account(3years) shows positive; merchandise trade shows positive; service trade shows negative; public debt level is moderate and has been on the increase during the past 3-4 years.

Answer 1

A. The size of the GDP figures show that it is amongst the top 20 economies of the world.

B. The growth rate of GDP suggests that this economy is on the path of moderate to high growth rate.

C. The per capita income reflects that there is enough purchasing power in the hands of people to buy goods and services.

D. The gini coefficient points to the inequalities in income and wealth exist but are not extreme.

E. The unemployment rate is low and inflation is modest.

F. The current account deficit shows that the country is importing more which may be due to shortages of domestic manufacturing firms. The capital account situation shows that the economy has a sound asset base.

G. The moderate public debt

indicates that there is no eminent threat to sovereign finances and the obligations of the government are highly likely to be fulfilled.

Analyzing the situation, I will recommend investment in such an economy except for a reservation that both the inflation and GDP grow at same rate and this may mean a stagnant economy if the real GDP is not growing.