World Financial Crisis Final

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Group 1:

Ajay GautamDhiki Lama

Mekh Bdr. KhatriPriyanka Siwakoti

Smita Shakya

Surendra Gurung


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Introduction

The USA is home to the 2008 world economic meltdown

Provoked unseen fears

The bankruptcy of the Lheman Brother in U.S.


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History of Financial Crisis

Wall Street Crash of 1929, followed by the Great

Depression


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Contd..

1973: oil crisis, oil prices soared causing the 1973-1974 stock

market crash

Secondary banking crisis of 1973-1975: United Kingdom

1980s: Latin American debt crisis - beginning in Mexico in

1982 with the Mexican Weekend1983: Israel- Bank Stock Crisis

1987: Black Monday - the largest one-day percentage decline

in stock market history

19891991: Unites States Saving and Loan crisis


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Contd

1990: Japanese asset price bubble collapsed

1992: The European financial crises

19941995: Economic crisis in Mexico

1997: Asian Financial and Economic crisis

1998: Russian financial crisis

20072011: Financial crisis of (2007-2011), followed by the

late 2000s recession and the 2010 European sovereign debt

crisis


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Origins of Global Financial Crisis


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Causes of Credit Crunch

Poor underwriting standards for mortgage loans resulting in a boom in theUS housing market

Weak regulation and supervision of banks

Exposure to the sub-prime security backed financial assets and collaterised

obligations (CDOs)

Inappropriate policy incentives (very low policy rates or a prolonged easing

in the monetary policy stance) resulting in abundant liquidity

Global imbalances

Indebtedness has led to financial crisis

The Efficient Market Fallacy


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Impact Of Economic Crisis In Europe

The fragile economies of Europe were still struggling from World

War first.

They had borrowed a great deal of money from American banks

that the banks now wanted back. The deep economic crisis which

has broken out in the United States continues to engulf the

European states.

The European Union is at a loss about what to do in the face of

financial crises erupting one after another in the member

countries.

The crunch makes itself felt acutely not only in such peripheral

and relatively small economies as Greece, Portugal, Ireland and

Spain but also in the heavyweights of the Union like Italy and

even France.


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Contd..

The economic crisis is giving way to political tumult and splits.

The financial support to come from the IMF seems to be the major factor on

which the settlement of the problems harassing Greece and the others is

contingent

With U.S. buying power down, foreign businesses were less able to export

their products and were forced to fire workers.

Governments tried to protect themselves by passing high tariffs, making

foreign goods expensive.

Germany and France, both serving as the engines of the Union, have carriedout some bailout programmes.

The EU is now at the mercy of a group of countries like the US, China, Japan

and Russia and some big banks and investors


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Impact of Global Financial Crisis In South Asia

The global financial crisis (February 17, 2009 )

Growth in South Asia decelerated in 2008, falling from 8 percent in2007 to 6 percent. It is projected to decline to 5 percent in 2009,

before recovering to 6 percent in 2010.

India

GDP growth rate is now estimated at around 7 percent for 2008,down from 9 percent in 2007, and is projected to decline to around 5

percent in 2009.

China

Less affected by the financial crisis than other countries, due to itsmore closed financial system. This has led other nations to urge

China to lend a greater financial hand such as increasing its own

imports.


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Impact, Problems & Challenges Of Economic Crisis In Nepal

Experiencing serious economic challenges by its own internal crisis

and global financial crisis too.

Major impacts of global financial crisis

Decreasing trend of export growth.

Increase in commodity price.

Disincentive for foreign direct investment (FDI).

Low capacity to spend development expenditure.

Increasing unemployment.

Adverse effect in tourism industry.


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1. Increase unemployment

Nepal is a small open economy.

Global financial crisis transmit to the economy of Nepal through the

foreign exchange, money, debt, credit, and capital markets.

Yearly about, 400,000 manpower has been added in the labor market of

Nepal.

Despite some relief in the employment problems of the country due to an

increasing access of Nepali people in the labor market abroad.

In the latter period, the number of non-skilled youths as well as educated

unemployed has also been increasing fast.

Problems and Challenges in the Nepalese Economy


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2. The impact on balance of payments (BOP)

The current account balance dropped to a negative of $47.1million in December, 2007 from a surplus of 13.3 million, a

year ago.

Fall in export, tourism receipts.


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Cont

3. Lack of improvement in investment climate:

Investment of the state and the private sector has been facing

so many problem.

Expected improvements have not been attained in economic

growth, poverty, unemployment, etc.

The major challenge has been the lack of favorable

investment climate in the country .


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4. High Inflation:

Although the price is declining all over the world in the wake of global

financial crisis for last few years, Nepal is facing a double digit

inflation.

It has adversely affected disadvantaged communities by the sharp price

increases of daily necessity items like rice, ghee, oil, sugar ,

vegetables. and so on.

Cont


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5. Energy Crisis

Electricity shortage has been a matter of another seriouschallenge in the context of Nepal.

This has resulted in a big decline in the overall productivity of

the country.

There is no possibility of additional electricity supply

immediately as the completion of hydro power projects takes

longer period.


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6. Poverty, Inequality and Discriminatory Attitude

7. Weak Performance of Public Enterprises

8. Effective Utilization of Resources and so on.


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Practice to Remove Financial Crisis

The South Asian countries can make some effort to reduce the adverse

effects of the financial crisis and prepare the way for a resumption of rapid

growth in 2010.

First: Policy attention needs to focus on creating as much additional

fiscal space as possible to prop up the domestic economy whilepreserving macro economic stability.

Second: A careful look at expenditure priorities.


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Third: The ongoing efforts to increase the efficiency and

effectiveness of the banking sector must continue.

Fourth: In the face of sliding world demand, efforts to raise domestic

productivity and competitiveness become critical factors for

protecting export market shares.

Finally in an environment of constrained resources, greater attention toimproving implementation capacity and corruption prevention in public

spending becomes even more important.


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Documents

World Financial Crisis Final