the global economy is weakening despite a surge in online commerce


Rapid technology advancement might be enough to convince you that domestic and global economies are getting better, but in fact, the situation is quite the opposite. A recent report from the International Monetary Fund (IMF) highlights the vulnerability of the world’s economy, as global debt hits an all-time high of over $150 trillion.

Such debt figures should not be a problem when the economy is growing quickly, but unfortunately, the world economy is not growing fast. Some of the most indebted countries have stagnant or declining economies. IMF says that a combination of slow economic growth, high debt, and weak banks could propel the world into a dangerous financial direction.

The number of online business-to-consumer transactions is rising rapidly.

Concerns about a weakening global economy have been further echoed by the United Parcel Service, Inc – the largest package-delivery company in the world – which is foreseeing future business turmoil as a result.Admittedly, UPS has recorded the strongest annual performance to date, in 2016; but this success is largely attributed to a drastic increase in the online shopping of consumer goods.

Business-to-business e-commerce accounts for the vast majority of total online sales, but deliveries to customers are growing at five times the rate of deliveries to businesses. Analysts forecast that UPS deliveries to customers will surpass those to other businesses by 2019.

The surge in online commerce has also benefited merchants by reducing the cost of searching for clients and adopting more competitive prices. The speed at which sales are conducted has also increased, thanks to flexible solutions from payment service providers like eMerchantBroker and PayPal.

This upward trend in online shopping can be beneficial when a country is recovering from small economic woes, but in a global crisis, a rush to meet the overwhelming demand from online customers can result in an unhealthy strain on manufacturing industries and supply chains.

 

Possible solutions

An increase in online consumer activity can’t be solely blamed for the world’s current economic situation. Turbulence in the global market, the oil-price crash, geopolitical conflicts and China’s transition to more balanced growth all add to these head wings.Consequently, the IMF is advising central banks to slash interest rates, which will reduce borrowing costs and give even indebted governments some breathing space.Governments which can afford to spend should do so, to lend a hand to other economies. Countries with bad banks are advised to help the banks clean up their bad loans, and those with good banks should spend more on industrialization to create jobs and boost the economy.

Moreover, governments are also urged to free up over-regulated jobs and markets, reduce international trade barriers and encourage research to promote productivity.Lastly, all countries should promote global cohesion. Disagreeing on policies, moving in opposite directions, closing borders and clamping down on international trade will only make things worse.