An economy is flourishing and is shown to be beneficial and fruitful for the people living in it only when the growth of the economy goes up continuously. It is essential for a country to not only develop politically or socially but it also needs to demonstrate economic development in order to sustain in the international market and in order to come ahead of other countries. But it is not very easy for any economy to economically keep growing because an umpteen number of internal and external factors that affect the growth and the economic development and it is essential and crucial for the countries to address the issues and move ahead. There are some very common challenges that are faced by an economy that are discussed below.
The presence of external imbalances in the global economy is one of the most influential causes that impose a challenge on the economic development of any country. There can be reasons such as political disruptions, changes in import-export scenario or foreign currency reserve changes that can lead to imbalance in a country that is external to an economy. But the disruptions taking place in one country can adversely affect the economy and economic growth of other countries as well.
The monetary and fiscal policies adopted by the government of an economy also have a huge role to play in the economic development. These policies tend to impact the interest rates, money supply and foreign exchange rates of an economy and if the policies are not in the favor of the growth, they can become major challenges and major issues all over the country.
The change in trade situations can also affect the economies. Exports of a country help it in generating external revenues while imports can be done for different purposes such as facilitation of a manufacturing process, providing basic necessities to the people etc. And hence if there is an imbalance in the external trade that is taking place in a country, it can lead to severe turbulence and can adversely impact the economic growth.
Other economic factors such as poverty, inflation rate, population also are dependent on an economy and also impact the economy. If a nation has higher level of poverty, it is more likely to have economic challenges and similarly high population is not desired and not advisable for high economic growth. And that is the reason why the governments usually try to avoid these unfavorable situations and try to maintain a balance in the countries by different measures.
There are many more reasons why the economies face severe challenge of demonstrating growth and hence it is crucial for the countries to adopt different and new policies in order to avoid these challenges and facilitate growth.
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