As per a new study conducted by the U.N., it was revealed that if the fiscal cliff is not controlled in the U.S., it could affect the economies of Asian countries adversely. The descending pressure on international business and lowering demand from the U.S. could result in serious trade depression in Asia, said a report by the U.N. Economic and Social Commission for Asia and the Pacific, reported CNN Money.
Fiscal cliff refers to the effects that the tax increments, spending cuts and the reduction of deficit could possibly have on the economy if it is not resolved by the end of 2013.
"The deficit-the difference between what the government takes in and what it spends-is expected to be reduced by roughly half, beginning in the first days of 2013. This sharp decrease in the deficit in such a short period of time is known as the fiscal cliff." explains Wikipedia.
The report stated that inability to resolve the issue could have adverse impacts on the region. It could kickstart a destabilizing trend in Asia as a result of uncertain policies and flooding capital, informed CNN Money.
"The failure to resolve this adequately could lead to growth in Asia-Pacific economies slowing by up to 2.2 percentage points in 2013, with exporting economies such as Singapore, Hong Kong, China and Malaysia being most hit," director of UNESCAP's Macroeconomic Policy and Development Division, Mr. Anis Chowdhury told NASDAQ.
However, despite the gloomy economic condition, China's economy seems to be recovering, Chowdhury told NASDAQ.
A complete failure to solve the crisis could hurl the American economy back into recession, which could result in a massive job loss scenario, warned CNN Money.
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