After the economic recession which started in 2007-2008, attempts have been made to recover from that crisis by various players both in the public and private sector. However, this recovery process has not been very successful, and there remain major economic challenges facing the global economy today.
The global cost of energy has been rising steadily since 2005, and the global economic crisis has not helped matters. The high cost of energy has been blamed for stagflation which continues to afflict many of the major world economies. With some economies like China and India showing a considerable thirst for oil, energy costs will remain a key issue in the global economy.
After the global economic crisis, the rates of unemployment have risen steadily and measures towards dealing with the problem seem to be ineffective. This problem is mainly experienced in the European and American economies only with the exception of Germany. This has resulted in civil unrest which has the effect of increasing the risk of doing business in those countries, resulting in increased interest rates as lenders seek a premium for assuming such risks. This further exacerbates an already worse situation.
Middle East Crisis
What had initially been described as the Arab spring has resulted into a full blown economic crisis. The collapse of governments in Tunisia, Egypt and Libya brought hopes of the development of democratic societies but this has only resulted in more dictatorship in Egypt as the democratically elected government was overthrown. Civil strife continues to affect Libya. A civil war has been going on in Syria for the last two years. These problems affecting the Middle East have had an impact in the global economy, considering that the region is a major producer of oil. The market in that area has been destabilized, and the economic fall of the region is felt globally.
The Euro Crisis
The European region has seen an economic crisis, which is viewed by many as an extension of the global economic meltdown experienced towards the end of the last decade. This crisis has affected in particular Greece, Portugal and Spain which have seen a rise in inflation and unemployment in those nations. As a result, the whole European Union economic bloc has had to endure the same hardships as they try to provide working solutions to the economic problem. Growth in the European economies has also been very sluggish, and this has not been helped by the political undercurrents such as the reluctance of the British to fully embrace the Euro and the suspicious view of Germany by other European nations which see it as benefitting at their expense.
Financial Markets regulation
The global economic crisis was blamed partly on unregulated financial markets. Though measures have been put in place to regulate the financial markets and banks, there still exists the risk of a repeat of the same if the proposed regulations are not implemented fully and in good faith. Regulation of the financial markets may also stifle growth as many firms and individuals will not be willing to bear the risks that are inherent in financial markets, thus affecting the economic climate. Regulation needs to be well informed and implemented, and this is a challenge which has not been dealt with conclusively. The regulation is also not uniform in all the economies, and this has set a stage in which there exists a potential for capital flight into jurisdictions where there are lower regulations.