Four emerging lessons from global financial crisis
Ramani Kangaraarachchi
There are four emerging lessons from the global financial crisis.
Firstly, South Asia's financial markets are more integrated with
global markets than ever thought of before. Secondly, even greater
emphasis is needed on domestic market reforms, improving the investment
climate, labour market functioning, and financial market deepening.
Thirdly, financial supervision needs to keep up with financial
innovation and finally coordinated responses among governments
regulators and countries pays off, said Regional Economic Advisor South
Asia, World Bank Shekar Shah.
He was speaking on the unfolding global financial crisis based on
Global Economic Prospects 2009 Report at a seminar organized by the
Institute of Policy Studies of Sri Lanka at the Taj Samudra Hotel last
week.
Referring to the risks for South Asia, he said that a deeper and more
prolonged credit crunch and global recession could take place. There is
a possibility for contraction in investment and exports displaying a
sharp slowdown in growth. Also the FDI and remittance in-flows could
fall-off markedly instead of moderately, and weakness in domestic
banking sectors could emerge.
When moving towards a quicker global recovery inflationary pressures
could return to the forefront.
He said that failure to protect growth in either situation would have
major adverse consequences for poor people. Shah proposed several
immediate policy responses to overcome these problems - Ensuring
adequate liquidity in both domestic and foreign currency, reduce scope
of currency mismatches, deploying country cyclical fiscal policy to the
extent feasible emphasizing infrastructure and safety nets, imposing new
tax or revenue measures as part of fiscal stimulus packages,
strengthening crisis preparedness, and supplementing with international
policy coordination.
South Asia: GEP 2009 macro projections
Country forecasts Est. Forecast
(GDP measured in constant 2000 US $) 91 2005 2006 2007 2008 2009 2010
00
Bangladesh
Real GDP growth (annual %) 4.8 6.0 6.6 6.4 6.2 5.7 6.2
Current account bal (% GDP) -4.0 -0.3 2.0 1.2 0.8 0.7 0.7
India
Real GDP growth 5.5 9.2 9.7 9.0 6.3 5.8 7.7
Current account bal -1.2 -1.0 -1.0 -1.2 -3.1 -1.7 -1.9
Nepal
Real GDP growth 5.0 3.1 3.7 2.6 5.5 3.8 4.9
Current account bal -6.3 0.0 -0.1 -1.2 1.2 1.0 0.8
Pakistan
Real GDP growth rate 3.9 7.7 6.2 6.0 6.0 3.0 4.5
Current account bal -3.7 -3.3 -5.4 -5.8 -8.1 -4.6 -3.2
Sri Lanka
Real GDP growth 5.2 6.0 7.7 6.8 6.3 4.0 5.5
Current account bal -4.6 -3.2 -5.3 -4.4 -7.5 -5.7 -5.5 |
