Impact of the global financial crisis
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Published: Mon, 5 Dec 2016
The financial crisis was originated from the bursting of US housing burble and it led to a strict of financial commotion and finally spread throughout the world. This has destabilized the financial markets of the developed world leading to collapse of notable names in the banking business and the production in these economies has been adversely affected leading to a decline in output (Mvula, 2009). Throughout this period, many economies have implemented fiscal and monetary policies to avoid further decline into deep recession. The development in the U.S financial sector has affected not only America but also European Union, U.K and Asia (Prasad & Reddy, 2009). The Asian Countries have also been infected by the financial corruption from US such as China, South Korea, Singapore, Taiwan, Japan, Hong Kong and Malaysia. The whole economy growth rate was slow down due to the falling the demand in develop countries such as manufacturing sector, trade, investment, GDP and so on.
Mvula (2009), it was negative impact in US economy especially in banking industry, when global financial crisis happen, the most finance industry has been badly hit of the mortgage bonds because of the subprime mortgages have fallen in value. Beside that, building industry was slow down with contributes 15 percent to US output has had a chain reaction on the other industries. Lehmen brother witch one of the company ranked among top investment bank who huge invest in property related investment including sup-prime mortgages. When the time cerise happens, value of housing decline, this due to them faces huge losses, around US$14billion. Not only that, this also led to Lehmen’s prime customers change their investment direction, shift their money to other safer investment avenues, lead to company’s face bankruptcy and collapse of Lehmen brother put tens thousand of jobs around the world at the dangers status.
India was one of the countries more affected from global financial crisis from US. “The Indian economy is being affected by the spill over effects of the global financial crisis”, Chidambaram (2008). Prasad & Reddy (2009), said that Indian economy also face the impact of the crisis though not to the same extent but the impact will be multi-fold. First, for information technology, US banks have huge running relationship with Indian Software Companies. The authors estimate that at least minimum of 30,000 Indian jobs could be impacted after happening in US. Beside that, Indian IT Sector revenue form US Software Companies was around 61 percent for example Bank of America, Morgan Stanley, Lehman Brothers, etc. Ratnayake (2008) said that crisis cause the interest rate instability in crisis period and unemployment in Indian increase, many company are layoff and wage cut were young employees who are working in Business Process Outsourcing and in Technology sectors. Author expected that the capital inflows in to the country would dry up and the immediate effect of the crisis has been outflow of the foreign institutional investment from the equity market. Financial market unstable led to rapid sell off by financial institutions and outlook of the economy slow down. Demand for export reduce lead to decrease in export growth, industries who are depend on the export mainly to the US are come down and some of the lending brands in the US to close down.
The most serious impact of the global financial crisis on the Chinese economy which falls in global demand which china was one of the highly export dependency country on US (Yu, 2010). Schmidt (2009) have a same result where the negative impact is not fully reflected but the clearly impact which is export-oriented light industry, thousands of company collapsed, tens thousands of workers have been unemployed and 10million workers have return on their home province. There was same major impacted on the china economy that direct losses in the American capital market, but compare with the other developed economies and economies in Eastern Europe, china’s direct losses in the financial market were limited. Beside that, the most serious impact of the crisis to China was the difficulty in obtaining trade financial that the adverse effect of which was most acutely felt in the processing trade industry. Furthermore, the growth of export in China also decline and wealth effect of the bursting of the asset bubbles also played a role in slowing growth (Yu, 2010)
The global financial crisis also give the negative impact to Malaysia economy especially exporting good to US since demand from important good reduce. Malaysia economy has been announced to be in recession with two quarter of negative growth in GDP (Ooi, 2010). Author also emphasize that it was reduction of import demand by Malaysia’s major trading partner has direct impact on Malaysia export and slow down the export growth. Next, country investment also affected were it also slow down in the private sector not even that, growth rate of private investment for most of the sectors turned in to negative in the forth quarter of 2008. Over 2008, consumption in private sector showed a decrease trend. The impact on unemployment is negatively affected in Malaysia, it was sharp decrease in the demand in world’s economy lead to business failure, wages decrease and employee benefits reduce, some firm even reduce the working hours to economize the business cost.
Mvula, R.(2009). The Global Financial Crisis – Impact on the World Economy. Retrieves January 31,2009, from http://www.scribd.com/doc/11531327/The-Global-Financial-Crisis-Impact-on-the-World-Economy
Chidambaram, P. (2008). Spill – over effects of global crisis will be tackled. The Hindu, Daily, November 19, 2008, P. 15
Ratnayake,K. (2008). International financial crisis exposes vulnerability of Indian economy. Retrieved October 29, 2008, from http:// www.wsws.org/
Yu, Y.D. (2010).China’s response to the global financial crisis. Retrieves January 24,2010, from http://www.eastasiaforum.org/2010/01/24/chinas-response-to-the-global-financial-crisis/
Yu, Y.D.(2010).The Impact of the Global Financial Crisis on the Chinese Economy and China’s Policy. Financial Crisis and Asian Development Countries. Malaysia: Third World Network
Prasad.A., & Reddy.P.( 2009). Global Financial Crisis and Its Impact on India. Department of Humanities and Social Sciences, 21(1),1-5.
Schmidt, D. (2009)
Ooi, S. M., 2010).
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