t is true to state that the impact lower economic growth has on the development and growth of the society is somewhat negative. This is because of the fact that the lower economic growth mostly results in higher risk of recession, a lower rate of spending and investment by the residents, weak growth potential for the corporate entities, weak growth potential in stock market, lower returns on pension and saving plans.
It has been discussed above that there would be a smaller rise in the corporate profits due to the slower growth in residential investment and consumer spending. Taking this into consideration, if another up cycle of the prices of commodity materializes, the slowdown in the corporate profit growth might be lessened (Dehn, 2000). Slower profit growth might result to a weaker growth potential for the stock market as profits are a key factor in the movement of the stock price.
The mixture of softer growth potential for the stock market and the lower rate of interest imply that the returns on the pension and savings plans would be lower in the upcoming years. Workers would be forced to raise their rate of saving if they wish to maintain the same living standard after retirement, at the same time lowering the allocation of their incomes in residential investment and personal spending. The current downside pressure could be intensified on these components by the same. Another feasible option is to maintain the same rate of saving which would mean that the workers can keep the same spending pace while they work. But, at the time of retirement the funds available in pension plans and savings would be smaller due to the fact that the returns are lower. This would force the possible retirees to cut onto their spending. Consumer spending in both the cases during the lifecycle of a household might be reduced. There would be a considerable financial and social pressure under these conditions to push back the retirement age. This is regarded as a possible solution which would lower the harmful impacts of lesser returns, at the same time would also offset the effect of the lower growth in the working age population.
In conclusion, it can be said that all the agents of the economy like government, households and businesses would face a negative effect due to the lower growth of economy. But, it is quite difficult to pinpoint the exact scope of these impacts. It is believed that the impact of the same could be lowered by increasing global trade and relying more on foreign demand so as to support the growth of the economy. But, this issue won’t be confined to a particular nation and majority of the countries would face fall in the growth potential to some extent. Thus, it would be true to state that exports gains would be unable to offset the shortfall. Hence, majority of the outcomes of lowered potential of output seems to be inevitable.