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A Look at the Week’s Global Economic Events

We take a look at global economic updates or interesting key developments that investors can take note of. First up is the threat to global economic growth that’s posed by falling birth rates. Next, I’ll be looking at the economic progress of the UK, which has seen its economic activity returning to pre-crisis levels.

Declining birth rates and its implications

Slightly more than a week ago, an article by Bernard Condon titled As births fall, economies may falter appeared in The Japan Times. The basic premise is this: As birth rates fall, the global economy may suffer.

According to Condon, birth rates in countries like China, Japan, Germany, Italy and the US, along with most of Europe, have been falling. The United Nations even has forecasts that the average woman in five of the world’s largest developed economies – the US, Japan, Germany, France, and Britain – would bear only 1.7 children in her lifetime. That’s a far cry from the fertility rate of 2.1 that’s needed to just maintain a country’s population.

With an increase in the population of the workforce being likely responsible for up to a third of economic growth in nations according to economists, falling birth rates is not good news for global economic development. In fact, studies have also shown how unemployment tends to go up as birth rates goes down.

It is also important to note that annual economic expansion in developed countries rests at around 3% but unless a surge in the workforce is experienced, it would be difficult even to sustain present growth-trajectories, let alone expand it. The US Congressional Budget Office estimates American economic growth in the next eight years as being at only 2.3% owing simply to a smaller workforce.

UK’s GDP returning to pre-crisis levels

In a time when almost every developed country is experiencing a decline in economic growth, research organization NIESR (National Institute of Economic and Social Research) has confirmed that the UK’s economic activity is close to regaining the levels reached before the occurrence of the Great Financial Crisis of 2007-2009.

According to the revised estimates from NIESR, the UK economy is estimated to grow at 2.9% this year followed by 2.4% in the next.

The country’s manufacturing sector had grown by 1.4% in the first quarter of 2014, the fastest pace since 2010, mainly due to a strong showing from plastics and rubber manufacturing activities. Food, beverages and tobacco, and machinery and equipment also attained considerable growth. But while the overall picture remains rosy in the UK, there are certain spots that still have plenty of room for improvement; the pharmaceutical industry is one as it had declined by 5.8%

If the UK’s economy does grow as expected, many Singapore-based companies can stand to benefit from the upswing since it is a top foreign direct investment destination for Singapore in the EU with several financial, real estate and communication firms such as Boustead Singapore (SGX:F9D) and Oxley Holdings (SGX: 5UX).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo owns shares in Oxley Holdings .