Asia-Pacific economies after the global financial crisis

Asia-Pacific economies after the global financial crisis

Lessons learned and the way forward You do not have access to this content

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26 Aug 2014
9789210541152 (PDF)

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This publication is to understand why countries in the Asia and Pacific region were significantly less affected by the global financial crisis than the world’s most advanced economies of Europe and the United States, and what are the main lessons from their experience for building resilience from future crises. The majority of the essays collected in this volume are revised and updated versions of papers presented by experts from the region at a conference organized by the Economic and Social Commission of Asia and the Pacific in Manila in September 2011.
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  • Abbreviations
  • List of contributors
  • Foreword
  • Preface
    There is an intriguing disjuncture between the impact of the 1997 Asian financial crisis and that of the 2008 global financial crisis on the export-oriented economies of the Asia-Pacific region.
  • Introduction
    Although the global financial crisis of 2008-2009 was the worst economic crisis in over 60 years for many industrial countries, most Asian and Pacific developing countries weathered it quite successfully. The resilience of the region is somewhat puzzling at first sight. In an increasingly globalized world, are not economic shocks supposed to be transmitted faster and farther than ever before? And should not the largest shock in decades affecting the central financial centres of the world cause substantial ripple effects? Yet, even those Asian and Pacific countries that were most exposed to drops in imports from the Western industrial countries and suffered significant drops in economic activity in 2009 recovered briskly in 2010. Furthermore, in contrast to the Asian financial crisis of 1997-1998, no country in the region experienced a collapse of its banking sector or a balance of payments crisis.
  • Bangladesh
    The powerful forces of globalization have made economies across the world so closely connected with each other that difficulties in some of them are very likely to have adverse impacts on other economies. As is well known, the global financial crisis which originated in the United States housing market in 2007 engulfed the world economy within a short period of time. The financial crisis and the consequent economic recession quickly affected almost all economies of the world, though in varying degrees. Although the developed industrial economies were the first victims, the crisis transmitted to the emerging and developing economies by 2008. The year 2009 experienced the first contraction of the global economy in the post-World War II era and the severe recession continued well into 2010.
  • China
    The objective of this chapter is to describe the impacts of the global financial crisis on the Chinese economy and the country’s policy responses. Particular attention is paid to China’s unique growth characteristics and the challenges it faces after the crisis. The following sections provide background information on the characteristics of the economic growth pattern in China, investigate the impacts of the global financial crisis on China, describe the Chinese policy response to the crisis, and analyse the challenges facing China in its transformation of growth patterns and economic structural adjustment.
  • Indonesia
    An important lesson from the 2008-2009 global financial crisis and its aftermath is that the world economy is highly interdependent with multiple sources of growth and new powerful links, both between developed countries and developing countries and among developing countries. A new structure of the world economy is underway, and the crisis has obviously accelerated the change in the global economic landscape in which the developing countries have acquired greater importance in global economic growth and a greater share of the global economy. Nearly half of the growth today is created by the developing countries. By increasing their importance in the global economy, developing countries have a bigger role in determining the state of the global economy. The current recovery process will not follow a smooth path as uncertainties are increasing. Hence it is very important for developing countries to respond and navigate through the current turmoil because any crisis (for instance, the ongoing European economic crisis) has the potential to escalate and derail the recovery process in the developing world.
  • Malaysia
    Malaysia experienced two major economic upheavals in recent years: the global financial crisis of 2008-2009 and the Asian financial crisis of 1998. They are quite different, however, when we look at their respective causes, impacts and responses. The 2008-2009 crisis came from the developed countries, the United States and the European Union, its impact was transmitted through the real sector, and recovery was achieved by a large fiscal stimulus to boost the domestic economy. The 1998 crisis started in East Asia and it affected the financial sector, which resulted in a severe contraction of the domestic economy. Malaysia’s response to the 1998 crisis was unconventional at that time – the country imposed capital controls, pegged the ringgit and expanded the domestic economy by lowering interest rates and introducing fiscal stimulus programmes.
  • Pacific Islands developing economies
    The Pacific island countries are small developing economies, the challenges of which are well documented. Such challenges are similar in many ways, but also varied as these countries are different in terms of population size, land area, culture and natural resources. Although the Pacific island countries were not directly or immediately affected by the global financial crisis of 2008-2009, they took precautions to cushion any potentially adverse effects. Isolated and small, the Pacific island countries developed strong economic ties with the outside world, particularly in sectors such as tourism and fisheries. In addition, the Pacific island countries have maintained strong links with their diaspora communities in Australia, New Zealand and the West Coast of the United States, whose remittances came as an unexpected but welcome support during the crisis years.
  • Pakistan
    Starting in the second half of 2007, the Pakistani economy began to show distinct signs of slowing down and started experiencing serious pressures on its fiscal and balance of payments situation. Growth in the economy took a sharp downward turn. By early 2012 the economy still had not recovered and remained mired in deep stagflation – characterized by low growth and high inflation. Economic policies that were adopted, including the ones under the International Monetary Fund (IMF) programme since November 2008, appear to have been of little help in reversing this situation.
  • Republic of Korea
    Financial globalization makes peripheral countries, especially small open economies with deep international financial linkages, vulnerable to credit shocks originating from the core countries. Regardless of their economic fundamentals, many emerging market countries (EMCs) were severely hit by the global financial crisis. In fact, one may even say that financial globalization has led to collateral damage, instead of the collateral benefits promised earlier (Kose and others, 2006). The Republic of Korea is a good example. This vulnerability has two specifics. One is the so-called capital inflows problem – that is the vulnerability of the economy and its financial system to massive capital inflows which could be suddenly stop. The other is the potential for high volatility in the foreign exchange (FX) market.
  • Thailand
    This chapter analyses Thailand’s experiences during the global financial crisis of 2008-2009 and during the flood crisis of late 2011. Given that Thai economy relied significantly on external demand, it was negatively affected by the adverse external environment arising from United States subprime financial crisis and the subsequent global economic slowdown that took place in late-2008 and the first half of 2009. As a result, Thailand’s GDP contracted by 4.1 per cent in the 4th quarter of 2008 and a further 6.1 per cent in the first half of 2009. But despite these large economic contractions, the Thai economy recovered rapidly in the second half of 2009, supported by government stimulus policies as well as by the gradual recovery of the global economy.
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