Financial And Economic Crisis - Assignment Example

? RESEARCH REPORT ON FINANCIAL AND ECONOMIC CRISIS Contents INTRODUCTION 2 OBJECTIVES OF THE STUDY 2 METHODOLOGY 2 REVIEW OF LITERATURE 3 The Theory of Financial Liberalization and the Washington Consensus 3 4 The Theory of Financial Liberalisation and Its Policy Implications 4 Moral Hazard 5 Stock Markets 5 The Causes and Effects of the Asian Financial Crisis of 1997 6 The Effectiveness of Multilateral Institutions 7 The Causes of the 2008-2011 Global Financial Crises 8 Europe and the Financial Crisis 9 The Financial Crisis and the Developing World 9 ANALYSIS OF DATA 11 SUMMARY AND CONCLUSION 13 Re-evaluating the Washington Consensus and Liberalisation 14 POLICY RECOMMENDATIONS 14 REFERENCES 16 APPENDICES 18 INTRODUCTION As governments in developing countries failed in their intervention to promote economic development, the theory of liberalization was promoted by the Washington Consensus. This led to deregulation, liberalization, and globalization. The weak economies of Asia were fragile to this system imposed by the institution of globalization led by the International Monetary Fund and this resulted to the Asian Financial Crisis of 1997. The United States and other developed countries also suffered a financial crisis which was mainly catapulted by the subprime chaos in 2007. This study would mainly explore the causes and effects of this crisis and would attempt to make policy recommendations. OBJECTIVES OF THE STUDY 1. To discuss and evaluate the theory of financial liberalization and the Washington Consensus and their failure; 2. To evaluate the causes and effects of the Asian Financial Crisis of 1997; 3. To analyze the effectiveness of multilateral institutions within the context of crises prevention and their role in the aftermath; 4. To identify early warning systems and methodologies that identify global imbalances that may be a precursor to crises; 5. To identify and evaluate the causes of the 2008-2011 Global Financial Crises; 6. To evaluate the relationship between world economic growth and liberalization and also consider the variability in world economic growth and liberalization/protectionism; and 7. Recommend policies on how the world can escape from this and prevent future crisis. METHODOLOGY This study will based its analysis and policy recommendations from the literature review and data gathered from the World Bank, International Monetary Fund, and other government agencies of countries such as the United States. Analysis of the charts and tables will also be conducted in order to derive evaluations of the causes and effects of the global financial crisis. REVIEW OF LITERATURE The Theory of Financial Liberalization and the Washington Consensus A theory was developed by the academic community as well as by the government of the United States of how to go about making progress in developing countries. This false concept of development was proposed by a term known as the “Washington Consensus” originated by an economist named John Williamson (1998). Basically, there were ten policy recommended for developing countries but it did not recognise that developing countries had various issues that required various policy solutions. These ten policy propositions are as follows: 1. There is a huge and continuing fiscal budgets in developing countries that lead to rising inflation flight of capital and as such governments should minimize them; 2. Subsidies must be decreased or avoided and that government spending must be prioritized towards education, health and development of infrastructures; 3. The tax base should be broad and marginal tax rates should be moderate; 4. The interest rates must be determined by the domestic financial markets. Positive real interest rates should discourage capital flight and increase savings; 5. A competitive exchange rate must be adopted by developing nations which will promote exports by making it less expensive in other countries; 6. The minimization of tariffs and which should not be applied to intermediate goods required in producing exports; 7. Foreign investment can increase the capital and skills and as such it should be promoted in developing countries; 8. Privatisation can make the economy more efficient in developing countries and as state-owned enterprises must be privatised. 9. Government regulations that are excessive must be minimize since this can increase corruption which can be detrimental for smaller businesses and as such governments in developing countries must deregulate the economy; 10. Rights to property must be strictly implemented and that weak laws and judicial systems which are poor decrease incentives to wealth accumulation and savings. Wealth (Williamson, 1998). As such, the IMF and the World Bank adopted the Washington Consensus as a requirement conditions for loans but these conditions were criticised as having a capitalist ideological framework and that only a few people such as the elite could benefit in developed countries. The Washington Consensus was implemented in developing countries through the agencies of globalization such as the International Monetary Fund (IMF), World Bank, and the World Trade Organization (WTO). The Theory of Financial Liberalisation and Its Policy Implications The intervention of the state in capital markets globally was well-known in the 1960s and 1970s and this is called as “financial repression.” These were done through high reserve requirements imposed by the state to private banks as well as requiring interest rate ceilings. In addition, the state intervened through imposing exchange controls, credit controls, and capital controls. State intervention resulted to unequal rates of interest in relation to equilibrium values. Interest rates determine the flow of money for investors and this affects the level of projects in an economy. As such, if interest rates were lower than equilibrium rate then this could result to the undertaking of bad projects. However, if interest rates were too high then lucrative projects would not be implemented (McKinnon (1973). This mismanagement of resources by the government during the periods mentioned rationalized the theory of liberalisation which argued higher interest rates would result to higher savings and investments and as such productive projects can be undertaken. Moral Hazard Economies which are deregulated may result to a banking system which may take high risks since interest rates are high. Although, there is deposit insurance which could protect depositors against the bank’s high risk investment actions, it is still the taxpayer that answers the bill. This is the problem of moral hazard which was observed during the Asian Financial Crisis. Whilst deposit insurance may protect depositors against the bank’s reckless investment strategies at the end of the day the tax payer foots the bill. This is again the moral hazard problem again that was evident before the Asian Financial Crisis. Liberalisation theories by McKinnon (1973) and Shaw (1973) did not tend to consider information relevant issues as it relates to the higher interest rates that follow liberalisation. Theories of traditional liberalisation ignored the necessity for prudent regulation in the banking system. Since perfect competition is a significant part of liberalisation theories, it is incompatible with the oligopolistic banking structure in developing nations which resulted to widening spreads between lending and deposit rates. This widening of rates can cause increase inefficiencies in the financial system. Stock Markets Liberalisation theory was developed before the era of emerging stock markets and this aspect particularly the stock market had not been evaluated as investment outlet for savings. The emerging stock markets resulted to the promotion of portfolio equity flows but high interest rates as a result of liberalisation tend to encourage high risk investment by the banking sector in the volatile stock market. Furthermore, this had also resulted to the influx of short-term funds to finance long-term investments leading to greater volatility. Liberalisation resulted to some problems such as the financial sector adjusting quickly than the real sector. The interest rate problem has also been mentioned above. In addition, the volatility of the open economy from external dangers and inadequate bank supervision could lead to macro-economic instability and tendencies toward more financial crisis. The study of Peter Henry (2000) found that there were abnormal rates of returns as markets were liberalized. He also confirmed that liberalisation of the stock tends to decrease the cost of capital of a nation. The Causes and Effects of the Asian Financial Crisis of 1997 In many cases, the story of the economic bubble in Asia began with bad banking. As such, according to Paul Krugman (1997): “The first act was the story of the bubble. It began, we now think, with bad banking. In all of the countries that are currently in crisis, there was a fuzzy line at best between what was public and what was private; the minister's nephew or the president's son could open a bank and raise money both from the domestic populace and from foreign lenders, with everyone believing that their money was safe because official connections stood behind the institution. Government guarantees on bank deposits are standard practice throughout the world, but normally these guarantees come with strings attached (Krugman, 1997).” Although it can be relatively safe to save in banks because of deposit insurance, the coverage is quite low in relation to what had been deposited and besides, it is the taxpayer who will pay the loss if the bank closes. Thus, the owners of banks in developing countries have to submit themselves to the high capital requirements for banks as it is monitored by their Central Banks. In effect, in reality the influence of powerful politicians on private banks gave them access to huge loans available for high risk investments. These loans were not only invested in the high risk and speculative stock market but also in real estate and other far countries. It looked lucrative during the pre-crisis period but the bubble came later. As such, Asia was set up for the explosion that was inevitable in the Asian Financial Crisis of 1997 (Krugman, 1997). Many foreign investors ran towards the exit and other investors withdrew their money from the banks while asset prices fell. Also, the currency exchange value of the local currencies declined badly against the United States dollar (Krugman, 1997). According to the International Monetary Fund and the World Bank, structural factors caused mostly of the economic problems and it was a financial sector crisis. The financial sectors in Indonesia, Korea, and Thailand were lacking proper prudential standards and supervision. Some financial institutions were allowed to borrow finances from other countries and this exposed their foreign exchange at risk. These sizable capital inflows also increased investment in equity and property which affected prices (Sugisaki, 1999). The huge conglomerate in Korea known as the “chaebol” borrowed excessively from foreign countries and these conglomerates suffered high debt/equity ratios and the huge terms of trade decline during the 1996-97 affected their financial viability and resulted to a chain of bankruptcies among them in 1997 (Sugisaki, 1999). Thus, it was clear that liberalisation in the Asian crisis was not really that beneficial to their economies and there is a necessity to evaluate the relationship between government and the enterprises so that this really reflects the actual market condition (Ghosh, 2005). There should also be a transparency in the financial between the state and the private enterprises. The Effectiveness of Multilateral Institutions The programs of the International Monetary Fund have been criticized since this promotes moral hazard as had been shown in the Asian Financial Crisis of 1997. Their programs have not work well for the Mexican crisis of 1994-1995 and the Brazilian crisis of 1998-1999. Their program would mainly be financial restructuring setting fiscal and monetary targets for crisis countries but still the main theme promotes liberalisation, deregulation and globalisation. The IMF did not predict the crisis because they insist to pursue an ideological framework for economic development and that is “free market” through the Washington Consensus with liberalisation theory as their main weapon in restructuring the economies of developing countries. As what happened in Asia, deregulation caused capital financials to be imbalanced and it resulted to the economic bubble that happened in 1997. They may refine their policies in these crisis countries but liberalisation would still promote openness and may result again to financial crisis in the future if unchecked (Krugman, 1997). The crisis in Asia was triggered by high interest rates and high capital flows that weakened its exchange rates and this was further weakened by high risk and faulty investments in the stock and the real estate market. The interest of the IMF is obviously for the major developed countries led by the United States since they view the world as a global market for products and services. Since the major industrialized possessed the financial and technological power in comparison with developing countries, they have the advantage of restructuring economic policies through Structural Adjustment Loans (SAL). The IMF has a precondition to these loans to developing nations wherein the liberalisation prescription is already programmed (Bello et al., 1982, Krugman, 1997). The Causes of the 2008-2011 Global Financial Crises The subprime mortgage crisis is a major factor that caused the United States economic crisis. The crisis started with the housing bubble with the rates of defaults on subprime and other adjustable rate mortgages starting to accelerate. About 1.3 million of houses were foreclosed during 2007 which increased to 79 percent from 2006 (Onaran, 2008). The ones that were responsible for the credit risk as borrowers defaulted on their payments such as the major banks and other financial institutions around the globe reported losses of around U.S. $379 billion as of May 21, 2008 (Onaran, 2008). The lenders had forwarded the mortgage payments rights to third-party investors through mortgage-backed securities (MBS) and collateralized debt obligations (CDO). Many of these corporate and institutional investors possessing these MBS or CDO suffered tremendous losses as the value of the mortgage assets decreased. In addition, this is compounded by the major decline of the stock market in the U.S. as well as in other countries (Onaran, 2008). Furthermore, the collapse of financial giants of Freddie Mac, Fannie Mae, American International Group (AIG) and other major banks and financial institutions in the United States affected other financial institutions and corporations around the world. Europe and the Financial Crisis In Europe, many major financial institutions failed and many others needed to be rescued. In Iceland, the dependence of its economy to the financial sector caused real economic problems for the country as the banking system almost collapsed and had to borrow from the International Monetary Fund (IMF) in order to rescue its economy (Shah, 2008). The European Union (EU) is proposing increases in spending and tax cuts valued at 200 billion Euros. This plan is designed to restore consumer confidence and minimize the economic crisis (Shah, 2008). The Financial Crisis and the Developing World In the developing countries, the rise in the prices of food and the residual effects of the financial crisis in the United States are causing uncertainties in terms of employment as more people are being laid off due to closures of electronics and manufacturing factories (Shah, 2008). The World Bank (2009) describes the effects of the crisis and that global trade is projected to decline in 2009 for the very first time since the year 1982. In addition, foreign investment and short-term credit are also decreasing. Also, the exports in developing countries are decreasing and huge capital has been withdrawn from these countries. In addition, the World Bank (2009) reported that many developing countries face sharply tighter credit and higher interest rates. Also, it reported problems such as the growth of the gross domestic product (GDP) in 2009 in developing countries is expected to go down to 4.5% from 7.9% in 2007. Furthermore, the remittances of workers that would be sent to their home countries would be declining. Before the financial crisis hit, many countries were already suffering a food and fuel crisis. The crisis further deepens the problem and the World Bank (2009) further estimates that around 130 to 155 million people are now into extreme poverty and another 44 million children are malnourished. Also, the measures to alleviate rising prices have resulted to fiscal problems in many countries. The most current global drama is exemplified with the financial rescue of governments from around the world with the amount of 2,000,000,000,000 (Gills, 2008). The global stock markets’ capitalization has been reduced by half, and yet the economy of the world had mountains of debts borrowed by the private sector Wolf, 2008).'Globalization would easily spur the crisis to catastrophic heights everywhere in the world (Wolf, 2008). This global crisis had been predicted and expected by Nouriel Roubini (2008) and he also predicted that there will be a period of ‘Global Stag-deflation' ahead. According to Bryant (2008), this syndrome could lead to a second bailout of the banks in order fill the funds gap and restore confidence in the system. The crisis lately also involves extreme exchange rate volatility as many emerging country currencies plummeting. Consequently the U.S. crisis caused stock markets and numerous currencies to decrease throughout Asia, prompting emergency forums of Asian-wide coordinated government action, which recommends fiscal action to stimulate domestic demand and also to loosen monetary policy. ANALYSIS OF DATA The unfavorable factor about the debt-fuelled growth in the U.S. economy is that most of the debts were borrowed by the Private Sector (see Table 1 and Chart 1). Private Sector Indebtedness soared to more than $20 trillion in 2007 and this is where the problem started when derivatives and structured notes such as Mortgage-Backed Securities (MBS), Collateral Debt Obligations (CDOs), Credit Swaps and other forms of derivatives collapsed in the market due to the subprime crisis when prices of house properties in the U.S. went down. The seven largest banks in the United States were heavily involved and were counterparties to investments in derivatives (see Chart 2). Wells Fargo, Bank of New York, Hongkong Shanghai Banking Corporation, Wachovia, Bank of America, J.P. Morgan/Chase. The largest investments were made by Wachovia, Bank of America, and J.P. Morgan/Chase and the estimated cumulative value of investments in derivatives valued at almost $50 trillion as of the year 2005. As such, as mentioned when the prices of house properties in the country declined, the value of derivatives went into a disastrous level and many investors panic and made tremendous losses. Many of the big banks and financial institutions collapsed and some of them were bailed out by the government. The U.S. subprime crisis resulted to the heavy decline of the market stock index in the United States (see Chart 3) in 2007 and affected other stock markets around the world resulting to heavy financial losses in trillions of dollars around the globe which can never be recovered by investors (see stock market index of other countries and regions (see Chart 4 to 7). The resulting stock index decline in the stock markets throughout the world is proof that the U.S. economic crisis had a tremendous impact on the global economy. The U.S. economic crisis affected the economic growth rates of other countries and the world (see Table 2) with world GDP at market prices declining from a growth rate of 4% 2006 to 3.7% in 2007 and further down to 2.5% in 2008. It is further projected to decline further at 0.9% in 2008 before it will recover to 3% in 2010. Private consumption of the world will also fall from 3.2% growth rate in 2006 to 3.3% in 2007 and further declined to 2.1% in 2008. The rest of the global economic indicators showed that the global economy was severely affected by the U.S. financial crisis. Even the GDP of high income countries declined from 3% growth rate to only 1.3 % growth rate in 2008. The other economic indicators showed declines which again can be contributed to the U.S. crisis. The rest of the detailed economic indicators of countries and regions (Table 3 to 11) showed declining GDPs and declining macro-economic growth indicators which further supported the theory that the global crisis is caused by the U.S. financial crisis. The rest of the developing countries economic indicators (see Table 5) showed declines in GDP growth and decline in other macro-economic indicators which just prove the predominance of the U.S. economy in the global scenario. SUMMARY AND CONCLUSION The subprime crisis in the United States resulted to the financial disaster in the stock market in the United States as well around the world as indicated by country and regional stock indices as shown in the charts of this study. The resulting stock index in the markets throughout the globe is proof that the U.S. financial crisis had a tremendous impact on the global economy. In addition, the impact of the U.S. financial crisis caused the GDPs and other macro-economic indicators around the world to decrease indicating that these countries were affected heavily due to globalization. In the developing countries such as South Asia, the global crisis hit these poor countries strong as they had barely recovered the shocks of trade problems that resulted from worldwide food and energy price increases. Their current accounts and fiscal balances worsened sharply and inflation surged to unprecedented levels. Furthermore, their dependence on foreign funding has been relatively large. The global crisis worsened their macroeconomic difficulties as sources of funding declined. The global economic slowdown due to the financial crisis would make them further vulnerable in terms of their export earnings, tourism receipts, remittances and external financing for infrastructure. Re-evaluating the Washington Consensus and Liberalisation The reform agenda of the “Washington Consensus” and multilateral institutions has results which were not satisfactory. As such, there is a need to evaluate countries or institution in terms of its nature and geography and that there is a need to uniquely determine their institutional structure. In reality, growth strategies and policies vary greatly from one nation to the other depending on its level of development and its position in the world economy. As such, reevaluating the balance between institutional convergence and diversity should be made. The liberalization policy imposed on developing countries created a structural disaster as liberalization increased interest rates which also enhanced investment flows. As the moral hazard of reinters in developing economies borrowed loans and invested it in high risk instrument resulted to the financial bubble in Asia in 1997. The big conglomerates in South Korea were allowed to borrow huge loans from abroad and this resulted to a high debt to equity ratio which affected its financial vulnerability. Liberalisation through deregulating economies had resulted openness and the weak financial structures of developing economies were prone to disaster. It is incompatible with the perfect competition model advocated by liberalization theory since developing nations in Asia had oligopolistic financial structures. POLICY RECOMMENDATIONS The following are the recommendations to alleviate and solve the economic crisis: 1. The United States government should formulate a policy for more strict accounting standards in assessing the viability of corporations especially financial institutions; 2. The government should form a committee or body to oversee the housing crisis and formulate solutions for the short term and also for the long term; 3. The government should learn from this housing crisis and in the near future should be more strict in monitoring financial institutions and also in terms of implementing financial and mortgage policies; and 4. More severe legal penalties should be passed by Congress to punish financial criminals in order to prevent prospective violators in the near future; 5. The World Bank and the United Nations should work together to restructure a new world economic order and looked into the problems caused by globalization; 6. The developing countries should strive for economic independence and not depend on the core nations since satellization would result to underdevelopment; 7. The further strengthening and nationalization of banks and financial institutions in other countries. Nation-states would become stronger if their banks are controlled by them as what other nations are doing during the financial crisis; 8. It is about time that the World Bank and other industrialized countries help each other and more help for the developing countries who are more suffering from these crisis through more worldwide consultations/conferences.. 9. Securities such as derivatives and structured notes should be reviewed and more strict regulations should be formulated in order to avoid a repeat of the disastrous effects of debt and derivatives. 10. A world economic crisis committee should be created in order to evaluate the causes and impact of the global crisis and monitor developments around the world. Countries which need more support and help should be given attention by this world body. 11. Sequencing of liberalisation events is an important key and that ssuccessful reform in the ‘real’ sector should be a prerequisite for reform in the financial sector. 12. Liberalisation of interest rates should be studied carefully and should be moderated in developing countries. 13. Improvement in the financial system of developing countries must first be implemented before liberalisation of the financial and banking sector. REFERENCES Bello, Walden, David Kinley, and Elaine Elinson (1982). Development Debacle: The World Bank in the Philippines. San Francisco, C.A.: Institute for Food and Development Policy. Bryant, David (2008) Berlin believes danger persists. Financial Times p. 6. Frank, Andre Gunder (1967). Capitalism and Underdevelopment in Latin America. New York & London: Modern Readers Paperbacks. Ghosh, Jayati (October 2005). “The Economic and Social Effects of Financial Liberalization: A Primer for Developing Countries.” DESA Working Paper No. 4, New York. Gills, Barry (2008). “The Swinging of the Pendulum: The Global Crisis and Beyond” Retrieved Dec. 4, 2011 from http://www.stwr.org/global-financial-crisis/ Gilani, Shah (2008). “The Credit Crisis and the Real Story Behind the Collapse of AIG” In MoneyMorning.Com. Retrieved Dec. 5, 2011 from http://www.moneymorning.com/2008/09/22/credit-default-swaps-2/ Henry, Peter Blair (2000). “Stock Market Liberalization, Economic Reform, and Emerging Market. Equity Prices” Journal of Finance, 55(2), 529-564 (Lead article; nominated for Smith Breeden Prize; Reprinted in: International Library of Critical Writings in Financial Economics, Richard Roll, (ed.), Edward Elgar Publishing; A Reader in International Corporate Finance, Stijn Claessens and Luc Laeven (eds.), the World Bank). Krugman, Paul (August 18th 1997). ‘What Ever Happened to the Asian Miracle?’ Fortune. McKinnon, Ronald I. (1973). Money and Capital in Economic Development, Washington, DC: Brookings Institution. Onaran, Y. (2008) Wall Street Firms Cut 34,000 Jobs, Most Since 2001 Dot-Com Bust. Retrieved on Dec. 6, 2011. 17, 2009 from Bloomberg.com http://www.bloomberg.com Onaran, Y. (2008) "Subprime Losses Top $379 Billion on Balance-Sheet Marks: Table. 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Retrieved Dec. 4, 2011 from http://www.worldbank.org/html/extdr/financialcrisis/ APPENDICES Table 1 Growth of US Debt, 1960-2007 Chart 1 Chart 2 Chart 3 Seven largest US banks' counter-party to their investment on the derivatives market - 2005 (Source: Office of the Comptroller of the Currency / US Department of Treasury) Chart 4 United States Stock Index, 2003-2007 Source: World Bank Chart 5 East Asia and Pacific Stock Index, 2003-2007 Source: World Bank Chart 6 Europe and Central Asia Stock Index, 2003-2007 Source: World Bank Source: World Bank Chart 7 Middle East and North Africa Stock Index, 2003-2007 Source: World Bank Table 2 World Actual Growth Rates, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 4.0 3.7 2.5 0.9 3.0 2. Private consumption 3.2 3.3 2.1 1.2 2.8 3. Government consumption 2.7 3.0 3.3 3.6 3.0 4. Fixed investment 6.7 4.8 2.7 -1.0 5.6 5. Exports, GNFS 9.8 7.5 6.2 -2.1 6.0 6. Imports, GNFS 9.0 6.8 5.4 -1.8 7.3 B. Contribution to GDP Growth 1. Private consumption 2.0 2.0 1.3 0.7 1.7 2. Government consumption 0.4 0.5 0.5 0.6 0.5 3. Fixed investment 1.5 1.1 0.6 -0.2 1.2 4. Net exports 0.2 0.2 0.3 -0.1 -0.4 C. Price Deflators 1. GDP at market prices 3.7 7.4 8.4 1.8 4.4 2. Private consumption 1.3 1.3 1.5 1.5 1.6 3. Exports, GNFS 5.6 7.2 14.0 -4.5 1.0 4. Imports, GNFS 6.3 7.7 15.3 -4.6 0.8 D. Share of GDP 1. Private consumption 59.9 59.5 59.4 59.7 59.5 2. Government consumption 17.3 17.3 17.5 18.0 18.1 3. Fixed investment 22.4 22.7 22.6 22.0 22.6 4. Change in stocks 0.4 0.5 0.6 0.6 0.5 5. Total investment 22.9 23.2 23.2 22.6 23.1 6. Exports, GNFS 30.6 31.6 34.5 31.4 31.2 7. Imports, GNFS 30.4 31.4 34.4 31.4 31.5 E. Memo 1. Nominal GDP (USD billions) 47764.9 53187.1 59080.4 60730.8 65318.1 2. Population (millions) 6397.3 6465.1 6532.2 6598.8 6665.0 3. GDP per capita, current USD 7466.4 8226.8 9044.4 9203.3 9800.2 4. Real per capita GDP growth 2.8 2.6 1.4 -0.1 2.0 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) .. .. .. .. .. 7. General government bal. (% GDP) -1.1 -0.9 -1.6 -1.8 -1.8 Source: World Bank Table 3 High Income Countries Actual Growth Rates, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 3.0 2.6 1.3 -0.1 2.0 2. Private consumption 2.7 2.6 1.1 0.3 1.9 3. Government consumption 1.8 2.1 2.1 2.6 2.1 4. Fixed investment 4.4 1.6 -0.8 -3.1 4.1 5. Exports, GNFS 8.6 6.2 5.9 -3.7 5.1 6. Imports, GNFS 7.7 4.9 3.1 -3.4 6.1 B. Contribution to GDP Growth 1. Private consumption 1.7 1.6 0.7 0.2 1.2 2. Government consumption 0.3 0.3 0.3 0.4 0.4 3. Fixed investment 0.9 0.3 -0.2 -0.6 0.8 4. Net exports 0.2 0.4 0.8 -0.1 -0.3 C. Price Deflators 1. GDP at market prices 2.3 6.2 6.6 1.8 3.7 2. Private consumption 1.2 1.3 1.4 1.4 1.5 3. Exports, GNFS 4.5 7.0 12.6 -2.9 1.1 4. Imports, GNFS 5.7 7.3 15.1 -3.9 0.7 D. Share of GDP 1. Private consumption 61.5 61.3 61.4 61.6 61.4 2. Government consumption 18.1 18.2 18.5 19.0 19.2 3. Fixed investment 21.0 20.7 20.0 19.1 19.4 4. Change in stocks 0.1 0.3 0.4 0.3 0.3 5. Total investment 21.1 21.0 20.4 19.4 19.7 6. Exports, GNFS 28.9 30.1 33.3 30.6 30.7 7. Imports, GNFS 29.6 30.6 33.6 30.7 31.0 E. Memo 1. Nominal GDP (USD billions) 36682.9 39935.1 43160.6 43856.3 46386.4 2. Population (millions) 1039.8 1043.9 1047.8 1051.3 1054.6 3. GDP per capita, current USD 35280.0 38254.8 41193.5 41716.4 43985.4 4. Real per capita GDP growth 2.3 2.1 1.0 -0.5 1.7 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) -1.0 -0.6 -0.6 -0.4 -0.6 7. General government bal. (% GDP) -1.5 -1.3 -2.1 -2.2 -2.0 Source: World Bank Table 4 Eurozone Actual Growth Rates, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 2.9 2.6 1.1 -0.6 1.6 2. Private consumption 2.0 1.5 0.4 0.0 1.4 3. Government consumption 1.8 2.2 1.8 1.6 1.5 4. Fixed investment 6.1 4.3 2.2 -4.7 3.1 5. Exports, GNFS 8.8 6.2 6.7 -5.6 4.1 6. Imports, GNFS 8.6 5.4 5.2 -6.2 4.7 B. Contribution to GDP Growth 1. Private consumption 1.1 0.9 0.3 0.0 0.8 2. Government consumption 0.4 0.4 0.3 0.3 0.3 3. Fixed investment 1.3 0.9 0.5 -1.0 0.7 4. Net exports 0.1 0.3 0.7 0.2 -0.2 C. Price Deflators 1. GDP at market prices 4.0 10.6 10.6 1.6 5.0 2. Private consumption 1.6 1.7 1.9 1.9 2.0 3. Exports, GNFS 5.0 9.0 12.6 -0.8 1.5 4. Imports, GNFS 6.6 9.3 15.5 -4.2 1.3 D. Share of GDP 1. Private consumption 57.3 56.7 56.8 56.4 56.3 2. Government consumption 20.1 20.0 20.3 20.5 20.6 3. Fixed investment 21.5 22.1 22.3 20.9 21.2 4. Change in stocks 0.2 0.2 0.0 0.0 0.0 5. Total investment 21.8 22.3 22.2 20.9 21.2 6. Exports, GNFS 37.7 38.4 41.3 38.3 37.9 7. Imports, GNFS 36.9 37.4 40.6 36.1 35.9 E. Memo 1. Nominal GDP (USD billions) 10286.1 11676.3 13056.4 13192.4 14066.1 2. Population (millions) 302.6 302.6 302.4 302.1 301.7 3. GDP per capita, current USD 33989.9 38590.1 43176.7 43668.4 46621.6 4. Real per capita GDP growth 2.5 2.6 1.2 -0.5 1.7 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 0.1 0.2 -0.1 1.4 1.2 7. General government bal. (% GDP) -1.2 -0.5 -1.1 -1.4 -1.1 Source: World Bank Table 5 Actual Growth Rates for Developing Countries, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 7.7 7.9 6.3 4.5 6.1 2. Private consumption 5.6 6.2 5.9 4.7 6.0 3. Government consumption 6.9 7.0 8.3 7.7 6.7 4. Fixed investment 13.6 13.7 11.5 3.4 8.8 5. Exports, GNFS 13.2 10.8 7.0 2.1 8.2 6. Imports, GNFS 13.4 12.6 11.9 2.4 10.0 B. Contribution to GDP Growth 1. Private consumption 3.2 3.5 3.3 2.6 3.3 2. Government consumption 0.9 1.0 1.1 1.1 1.0 3. Fixed investment 3.5 3.8 3.3 1.0 2.6 4. Net exports 0.3 -0.3 -1.6 -0.1 -0.7 C. Price Deflators 1. GDP at market prices 8.2 10.8 13.0 1.5 5.8 2. Private consumption 1.3 1.5 1.7 1.7 1.8 3. Exports, GNFS 8.8 7.7 17.4 -8.4 0.7 4. Imports, GNFS 8.0 8.8 15.7 -6.3 1.2 D. Share of GDP 1. Private consumption 54.5 54.2 54.2 54.8 54.7 2. Government consumption 14.4 14.4 14.7 15.4 15.6 3. Fixed investment 27.3 28.7 29.6 29.7 30.4 4. Change in stocks 1.4 1.2 1.2 1.1 1.0 5. Total investment 28.7 29.9 30.8 30.8 31.4 6. Exports, GNFS 36.2 36.1 37.8 33.3 32.4 7. Imports, GNFS 33.1 34.0 36.6 33.1 32.9 E. Memo 1. Nominal GDP (USD billions) 11082.0 13252.1 15919.8 16874.5 18931.6 2. Population (millions) 5357.6 5421.2 5484.5 5547.5 5610.4 3. GDP per capita, current USD 2068.5 2444.5 2902.7 3041.8 3374.4 4. Real per capita GDP growth 6.4 6.6 5.1 3.3 4.9 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 4.2 3.8 2.9 2.0 1.6 7. General government bal. (% GDP) 0.2 0.2 -0.3 -1.0 -1.1 Source: World Bank Table 6 Actual Growth Rates for East Asia and the Pacific, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 10.1 10.5 8.5 6.7 7.8 2. Private consumption 2.6 3.4 5.6 6.7 7.9 3. Government consumption 9.5 11.8 13.0 13.4 10.4 4. Fixed investment 12.6 12.9 10.5 6.9 8.4 5. Exports, GNFS 18.6 15.4 8.3 2.6 9.7 6. Imports, GNFS 11.6 10.9 10.8 3.4 11.7 B. Contribution to GDP Growth 1. Private consumption 1.2 1.4 2.2 2.6 3.1 2. Government consumption 1.3 1.6 1.8 2.0 1.6 3. Fixed investment 4.5 4.7 3.9 2.6 3.2 4. Net exports 4.6 3.8 0.2 0.0 0.5 C. Price Deflators 1. GDP at market prices 4.5 7.5 12.5 8.9 7.6 2. Private consumption 1.3 1.4 1.6 1.7 1.8 3. Exports, GNFS 4.3 6.0 12.7 -2.6 1.2 4. Imports, GNFS 6.4 7.4 15.7 -5.7 1.2 D. Share of GDP 1. Private consumption 42.5 40.4 40.0 39.7 39.8 2. Government consumption 13.5 13.8 14.8 15.9 16.8 3. Fixed investment 39.2 40.1 40.4 39.6 39.5 4. Change in stocks 1.2 0.8 2.0 1.8 1.6 5. Total investment 40.5 40.9 42.4 41.4 41.2 6. Exports, GNFS 47.1 48.5 48.5 41.7 40.0 7. Imports, GNFS 40.0 40.0 42.0 35.3 34.3 E. Memo 1. Nominal GDP (USD billions) 3465.8 4118.9 5024.3 5836.8 6769.8 2. Population (millions) 1837.2 1852.1 1867.0 1881.8 1896.7 3. GDP per capita, current USD 1886.5 2223.9 2691.1 3101.6 3569.3 4. Real per capita GDP growth 9.2 9.7 7.6 5.9 7.0 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 8.6 10.5 9.0 8.7 7.7 7. General government bal. (% GDP) -0.6 0.2 -0.9 -1.4 -1.5 Source: World Bank Table 7 Actual Growth Rates for Europe and Central Asia, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 7.5 7.1 5.3 2.7 5.0 2. Private consumption 8.2 8.5 8.4 5.3 6.2 3. Government consumption 5.2 5.5 4.9 3.3 4.0 4. Fixed investment 14.9 15.4 10.0 -0.7 7.2 5. Exports, GNFS 8.0 7.8 9.4 5.4 10.1 6. Imports, GNFS 15.5 18.8 14.7 6.3 11.0 B. Contribution to GDP Growth 1. Private consumption 5.2 5.4 5.4 3.5 4.2 2. Government consumption 0.7 0.7 0.6 0.4 0.5 3. Fixed investment 3.3 3.7 2.6 -0.2 1.9 4. Net exports -3.4 -5.5 -3.6 -1.2 -1.8 C. Price Deflators 1. GDP at market prices 11.4 17.8 18.7 2.9 6.1 2. Private consumption 1.8 2.1 2.6 2.7 2.8 3. Exports, GNFS 12.9 10.5 20.8 -13.6 0.7 4. Imports, GNFS 10.1 9.0 15.3 -7.5 1.5 D. Share of GDP 1. Private consumption 59.3 59.7 61.7 64.2 64.6 2. Government consumption 16.5 16.1 16.1 16.5 16.2 3. Fixed investment 21.5 23.1 24.1 23.6 24.0 4. Change in stocks 1.0 1.0 0.0 0.0 0.0 5. Total investment 22.5 24.1 24.1 23.6 24.0 6. Exports, GNFS 36.9 34.9 36.8 31.7 31.6 7. Imports, GNFS 35.7 36.6 38.7 36.0 36.4 E. Memo 1. Nominal GDP (USD billions) 2236.5 2819.9 3527.3 3727.2 4152.5 2. Population (millions) 424.0 424.2 424.4 424.6 424.8 3. GDP per capita, current USD 5274.7 6647.3 8311.3 8778.5 9776.0 4. Real per capita GDP growth 7.4 7.0 5.3 2.7 5.0 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 1.5 -0.6 -0.8 -4.1 -4.5 7. General government bal. (% GDP) 2.9 2.4 1.9 1.1 1.1 Source: World Bank Table 8 Actual Growth Rates for Latin America and the Caribbean, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 5.6 5.7 4.4 2.1 4.0 2. Private consumption 6.3 6.9 5.4 3.1 4.6 3. Government consumption 4.6 4.0 4.5 2.4 2.6 4. Fixed investment 14.6 12.2 14.6 -4.1 8.8 5. Exports, GNFS 7.7 5.0 1.7 -2.1 2.4 6. Imports, GNFS 14.3 11.9 12.3 -3.9 6.9 B. Contribution to GDP Growth 1. Private consumption 4.2 4.6 3.6 2.1 3.1 2. Government consumption 0.7 0.6 0.6 0.3 0.4 3. Fixed investment 2.7 2.4 3.1 -1.0 1.9 4. Net exports -1.6 -1.9 -2.9 0.6 -1.4 C. Price Deflators 1. GDP at market prices 12.3 11.0 13.4 -5.7 2.4 2. Private consumption 1.1 1.3 1.4 1.4 1.4 3. Exports, GNFS 12.3 8.8 19.8 -11.9 0.1 4. Imports, GNFS 6.9 7.0 14.4 -4.8 1.0 D. Share of GDP 1. Private consumption 62.4 62.6 62.3 64.4 64.8 2. Government consumption 15.0 14.8 14.7 14.9 14.7 3. Fixed investment 19.8 21.1 23.0 22.1 23.2 4. Change in stocks 1.0 0.8 0.7 0.6 0.6 5. Total investment 20.8 21.9 23.7 22.7 23.8 6. Exports, GNFS 26.1 25.4 26.1 23.4 22.5 7. Imports, GNFS 24.1 24.6 26.6 25.3 25.6 E. Memo 1. Nominal GDP (USD billions) 2905.5 3408.7 4037.5 3889.6 4145.0 2. Population (millions) 546.0 553.1 560.1 567.2 574.2 3. GDP per capita, current USD 5321.2 6162.9 7208.2 6858.1 7219.1 4. Real per capita GDP growth 4.2 4.4 3.1 0.9 2.8 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 1.6 0.5 -0.6 -0.3 0.0 7. General government bal. (% GDP) 1.4 1.3 0.9 0.6 0.4 Source: World Bank Table 9 Actual Growth Rates for Middle East and North Africa, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 5.3 5.8 5.8 3.9 5.2 2. Private consumption 6.2 6.1 7.0 4.2 6.0 3. Government consumption 4.2 1.8 8.7 5.4 5.4 4. Fixed investment 4.8 16.8 18.9 7.0 10.5 5. Exports, GNFS 6.7 6.0 10.1 -2.1 4.9 6. Imports, GNFS 7.6 14.3 19.8 1.7 8.8 B. Contribution to GDP Growth 1. Private consumption 3.8 3.8 4.3 2.6 3.7 2. Government consumption 0.6 0.2 1.1 0.7 0.7 3. Fixed investment 1.2 4.2 5.2 2.2 3.3 4. Net exports -0.6 -3.1 -4.3 -1.3 -2.2 C. Price Deflators 1. GDP at market prices 9.9 3.3 13.7 -2.4 3.8 2. Private consumption 1.1 1.2 1.4 1.4 1.5 3. Exports, GNFS 16.2 7.0 25.4 -17.7 -0.1 4. Imports, GNFS 9.9 8.6 15.9 -7.6 0.8 D. Share of GDP 1. Private consumption 53.1 54.1 54.4 58.8 60.2 2. Government consumption 13.2 12.9 13.1 14.2 14.4 3. Fixed investment 23.1 24.9 25.6 27.0 27.8 4. Change in stocks 3.9 4.5 3.1 2.7 2.2 5. Total investment 27.0 29.4 28.6 29.7 30.0 6. Exports, GNFS 40.9 42.5 48.7 38.8 37.2 7. Imports, GNFS 34.4 39.0 45.0 41.7 41.9 E. Memo 1. Nominal GDP (USD billions) 636.8 696.0 837.2 849.1 926.7 2. Population (millions) 269.2 274.0 278.7 283.4 288.1 3. GDP per capita, current USD 2365.4 2540.1 3003.6 2995.5 3216.4 4. Real per capita GDP growth 3.6 4.0 4.0 2.2 3.5 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 14.9 12.8 13.5 6.0 4.1 7. General government bal. (% GDP) 0.7 1.3 2.0 0.0 -1.0 Source: World Bank Table 10 Actual Growth Rates for South Asia, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 9.0 8.4 6.3 5.4 7.2 2. Private consumption 6.0 7.5 5.7 4.7 5.7 3. Government consumption 10.0 4.9 8.8 9.2 6.7 4. Fixed investment 16.5 13.5 7.1 4.8 10.7 5. Exports, GNFS 17.3 7.3 4.3 3.7 8.3 6. Imports, GNFS 21.9 7.0 6.5 2.7 7.8 B. Contribution to GDP Growth 1. Private consumption 3.8 4.6 3.4 2.8 3.4 2. Government consumption 1.1 0.5 0.9 1.0 0.7 3. Fixed investment 4.2 3.7 2.0 1.4 3.0 4. Net exports -0.8 0.0 -0.5 0.2 0.0 C. Price Deflators 1. GDP at market prices 3.2 13.7 2.9 -2.1 7.2 2. Private consumption 1.2 1.4 1.5 1.5 1.6 3. Exports, GNFS 14.7 15.3 11.6 -1.8 0.7 4. Imports, GNFS 12.0 18.0 20.9 -11.1 0.3 D. Share of GDP 1. Private consumption 60.3 60.3 60.7 60.6 59.6 2. Government consumption 10.7 10.5 10.8 11.2 11.1 3. Fixed investment 28.7 30.4 31.0 30.9 31.9 4. Change in stocks 2.6 2.2 2.1 2.0 1.8 5. Total investment 31.3 32.6 33.0 32.9 33.7 6. Exports, GNFS 23.8 23.9 25.4 25.1 23.8 7. Imports, GNFS 28.4 29.1 34.3 30.4 28.6 E. Memo 1. Nominal GDP (USD billions) 1132.6 1395.9 1525.9 1574.0 1809.3 2. Population (millions) 1509.6 1531.2 1552.5 1573.4 1594.1 3. GDP per capita, current USD 750.2 911.6 982.9 1000.4 1135.0 4. Real per capita GDP growth 7.2 6.9 4.8 4.0 5.8 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) -1.5 -1.6 -3.5 -2.0 -1.9 7. General government bal. (% GDP) -6.1 -6.4 -8.1 -8.6 -8.0 Source: World Bank Table 11 Actual Growth Rates for Sub-Saharan Africa, 2006-2010 2006 2007 2008 2009 2010 A. Real Expenditure Growth 1. GDP at market prices 5.9 6.3 5.4 4.6 5.8 2. Private consumption 6.5 6.5 3.4 3.5 5.2 3. Government consumption 6.0 6.2 5.4 6.0 7.4 4. Fixed investment 19.4 20.3 12.7 7.7 9.9 5. Exports, GNFS 4.7 5.4 5.9 4.5 7.2 6. Imports, GNFS 12.8 11.9 7.6 5.6 9.4 B. Contribution to GDP Growth 1. Private consumption 4.0 4.0 2.1 2.1 3.1 2. Government consumption 1.0 1.1 0.9 1.0 1.3 3. Fixed investment 4.3 5.1 3.6 2.3 3.1 4. Net exports -3.1 -2.9 -1.2 -0.8 -1.6 C. Price Deflators 1. GDP at market prices 7.6 8.5 13.0 -1.4 6.9 2. Private consumption 1.5 1.6 1.8 1.9 2.0 3. Exports, GNFS 14.8 10.9 28.3 -16.8 1.0 4. Imports, GNFS 3.9 7.9 14.9 -5.6 1.6 D. Share of GDP 1. Private consumption 58.5 58.9 56.0 58.4 58.0 2. Government consumption 17.2 17.4 16.6 17.6 17.9 3. Fixed investment 19.6 22.2 22.5 24.1 25.2 4. Change in stocks 1.1 0.7 0.5 0.5 0.4 5. Total investment 20.7 22.8 23.0 24.6 25.6 6. Exports, GNFS 38.5 39.0 44.6 37.6 35.9 7. Imports, GNFS 35.6 37.3 38.8 37.4 36.8 E. Memo 1. Nominal GDP (USD billions) 704.8 812.7 967.6 997.9 1128.4 2. Population (millions) 771.5 786.6 801.8 817.1 832.6 3. GDP per capita, current USD 913.6 1033.2 1206.8 1221.3 1355.2 4. Real per capita GDP growth 3.4 4.3 3.4 2.7 3.8 5. USD Fx rate .. .. .. .. .. 6. Current account balance (% GDP) 0.7 -0.3 1.0 -3.5 -3.7 7. General government bal. (% GDP) 1.0 -1.9 -0.6 -1.3 -1.5 Source: World Bank Read More