A Macroeconomic Comparison and Financial Analysis of Greece and Mexico
The world is made up of different countries whose economic, financial performance and stability differ. The differences arise based on the diversity of economic resources and the governance policies and strategies (Park 2012). Historically, countries have faced economic and financial crisis whose causes can be local or foreign. Such crisis affects the development rate and the quality of life for the people. The comparative study of two countries can assist in understanding the differences regarding economic performance and financial stability. It is worth noting that the analysis can assist in evaluating the nature of economic crisis ever faced by the two countries at separate times, the causes, and how the challenges were resolved. The two countries considered, in this regard, are Greece and Mexico. Therefore, two fundamental objectives have triggered the comparative study. The first objective is to undertake macroeconomic comparison and financial analysis of Greece and Mexico. The second one is to evaluate the role of the government and other players in achieving a stable financial market.
The understanding of the objectives would be realized with the application of an effective and relevant study method. A critical review of economic data and information from government websites, World Bank, and other websites such as trendingeconomies.com is the method of the study applied. For the purpose of comparison, the key indicators considered include governance, debt crisis, fiscal and monetary policy, foreign exchange, foreign direct investment, and human development index. Based on the comparison, suggestions on the best way forward for the chosen countries will be provided.
According to BBC News (2016), Greece historical and cultural heritage are still popular not only in Europe but also across the world. The country is situated in the southern Balkan Peninsula with the combination of mountains on the mainland and over 1,400 islands. After the World War II, the economy reported significant economic and social change, which was driven by huge tourism and shipping as key economic sectors. As a result of the high economic growth, the government embarked on high public spending on social goods and services. Nevertheless, the widespread tax evasion led to the economic recession and credit crunch, which has affected the performance of the economy over the years since 2009 (Trading economics.com 2016a). Worth noting is that the country has about 11 million people while its country’s National Gross Domestic Product (GDP) stands at US$195 Billion (Trading economics.com 2016a).
Mexico is a federal State located in North America bordering the United States and Belize and Guatemala to the north and southeast respectively (Buckley 2011). With a population of about 119.7 million people, the National Gross Domestic Product (GDP) for the year 2015 was US$1144. 33 billion. After the World War II, the country embarked on economic growth and development. In the 1970s, the economy becomes a major petroleum producer, hence improving its growth in revenues. Nevertheless, the government accumulated huge external debt pegged on the revenues (Buckley 2011). The drop in oil prices in the 1980s affected its revenue and the ability to pay the debts. In 1994, the country joined the United States and Canada and formed the North American Free Trade Agreement (NAFTA).
The Comparison of the Two Countries
The debt crisis is a financial and economic problem in which public debt accumulates beyond the acceptable limits, and the government is unable to pay the loans and the interest charges (Buckley 2011). It is a weakness in public finance management in a country. At times, the crisis can be associated with the economic downturn, which impedes the ability of the government to raise adequate revenue to support the servicing of the debts (Buckley 2011). The crisis faced in the Greece economy currently and in the past few years are therefore as a result of the poor public finance management. In fact, according to Akram and others (2011), the government borrowed hugely to fund military funding, which did not assist in raising revenue to support the repayment of the debts. In the 1980s, the government borrowed at an increasing rate but failed to put in place economic growth measures. Upon joining the Eurozone in the 1990s, the debt to GDP rate gained a relative stability as shown in the graph below. The rate worsened in the late 2000s where it was the same time that the world economic crisis was being experienced based on financial instability in the United States. As other economies in Europe and beyond are heading into recovery, Greece continues to experience the impact to date (Mussachio 2012).