Global Financial Crisis

:Preented by
 Outline of the Presentation
Wh a t i s Re c e s s i o n ?
Wh a t i s Fi n a n c i a l Cr i s i s ?
Th e Ge n e s i s o f t he c u r r e n t p r o b l e m
I mp a c t o n US
Ca u s e s o f Su b -Pr i me Cr i s e s
Ec o n o mi c I mba l a n c e
I mp a c t o f t h e Cr i s e s
Wh a t d i d Go v e r me n t s do ?
Ef e c t s o n De v e l o pi n g Co u n t r i e s
Ro l e o f G-20 i n s o l v i n g f n a n c i a l c r i s e s
Ef e c t s o n Pa ki s t a n
Cu r r e n t s c e n a r i o a c r o s s t h e g l o b e
Al t e r n a t i v e Vi e w
Co n c l u s i o n
 ?What is Recession
Arecessionisdefnedas aperiodoftimewhentheeconomy
contracts (negativeeconomicgrowth) for 2 consecutive
quarters. Arecessionis characterizedby
LowerOutput
Lowerinvestment
HigherUnemployment
IncreasedPSNCR (PublicSectorNetCash
Requirements)
Lesser EconomicGrowth
 Th e t e r mfnancial crisis is applied broadly to a variety
?What is a Financial Crisis
of
s i t u a t i o n s i n wh i c h some fnancial institutions or assets
. suddenly lose a large part of their value

I n t he p a s t f n a n c i a l c r i s e s h a v e b e e n g e n e r a t e d by
c o mb i n a t i o n o f f a c t o r s s u c h a s :
Ov e r s h o o t i n g o f ma r ke t s
Ex c e s s i v e l e v e r a g i n g o f d e bt , a n d c r e di t bo o ms
Mi s c a l c u l a t i o n s o f r i s k
Ra pi d o u t f o ws o f c a pi t a l f r o ma c o u n t r y
Un s u s t a i n a bl e ma c r o e c o n o mi c po l i c i e s
I n e x pe r i e n c e wi t h n e wf n a n c i a l i n s t r u me n t s , a n d
De r e g u l a t i o n wi t h o u t s u f c i e n t ma r ke t mo n i t o r i n g a n d
o v e r s i g ht .
 WHAT HAPPENED ?
Low interest rates, high leverage and overconfidence led to the
creation of bubbles which then burst.

I t a l l s t a r t e d a d e c a d e b a c k wi t h a b o o mi n g h o u s i n g ma r ke t

i n Ame r i c a .
Th e b o o mwa s l a t e r f u e l e d b y e x p a n s i o n o f l i q u i d i t y i n t h e

s y s t e mi n t h e f o r mo f Mo r t g a g e d b a c ke d Se c u r i t i e s a n d
Co l l a t e r a l i z e d De b t Ob l i g a t i o n s (CDO) i n v e n t e d b y Wa l l
St r e e t .
I n t h e f r s t f e wy e a r s t h e r e wa s j u s t t o o mu c h d e ma n d f o r

a l l I n v e s t me n t Gr a d e p r o p e r t i e s .
 Effective Federal Funds Rate, June 1954 - Jan 2010
Interest Rates have gone from 2% to 20% and then down to 0.12%,
..They have nowhere to go but up now
20

15

10

0
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Fed Funds Rate

Source: Federal Reserve Board of Governors
 Sub-prime Mortgage
Crisis
Mo r t g a g e br o ke r s a n d Mo r t g a g e Le n de r s we r e mo r e t h a n
h a ppy t o l o o k f o r a n y bo dy a n d e v e r y bo dy wh o wa n t e d a
mo r t g a g e (Wh i c h i n s i mpl e t e r ms me a n s h o me l o a n ).

I n I n i t i a l f e wy e a r s bo o mwa s o bs e r v e d i n Ame r i c a n
Ho u s i n g Ma r ke t be c a u s e o f Su bpr i me Le n di n g a n d CDOs .
Be t we e n y e a r 2002 a n d 2006 pr o pe r t y p r i c e wa s i n c r e a s e d by
a l mo s t 40% .

I n c a s e o f Su bpr i me Le n di n g n o o n e i s t a ki n g e n o u g h c a r e
t o s e e t h e r e pa y me n t c a pa c i t y o f bo r r o we r , i n s o me c a s e s
e v e n ma r g i n mo n e y wa s wa i v e d o f.

Th i s wa s a pe r f e c t f o u n da t i o n f o r di s a s t e r . Equ i t y wa s
s c a r c e a n d s h o r t i n s u ppl y .
Th e v a l u e o f CDOs t a r t e d g o i n g do wn wa r d . I t wa s u n a bl e t o
pa y n e i t h e r t he c a pi t a l n o r t h e r e t u r n s .

Du r i n g t h e y e a r 2007, t h e ba l a n c e s h e e t a n d pr o f t a c c o u n t
o f i n v e s t me n t ba n ke r s , ba n ks &f n a n c i a l i n s t i t u t i o n s
wa s f a v o r a bl e a n d r u n n i n g t h e r i de o f o pt i mi s m. Th i s
h e l pe d ba n ks i n f a t e t h e i r e a r n i n g s a n d pr o f t
f or e c a s t s ,a nd i n t ur n t he i r v a l ua t i ons .

Ba n ke r s s t a r t e d l e v e r a g i n g t h e i r o wn ba n ks i n s t o c k
ma r ke t . Aclose look at the leverage ratio of top 5 banks in
US t e l l s t ha t i t wa s a n a l l t i me h i g h du r i n g y e a r s 2003-
2007.

Hi g h e r t h e l e v e r a g e r a t i o , h i g h e r i s t h e de f a u l t r i s k . I f
a n y ba n k i s l e v e r a g e d by 10 t i me s , po s i t i v e c h a n g e o f $1 c a n
br i n g $10 pr o f t bu t n e g a t i v e c ha n g e o f $1 c a n br i n g $10
Pe o pl e we r e bu y i n g a s i f t h e r e wa s n o t o mo r r o w. I n y e a r
2005, boom in economy was halted . In year 2006, there was
ma r g i n a l i n c r e a s e i n pr o pe r t y pr i c e s .

I n Ye a r 2006, Fe d h a s i n c r e a s e d i t s I n t e r e s t r a t e wh i c h
i n t u r n a f e c t e d l e n d i n g r a t e o f s u bpr i me l o a n s .

As i n t e r e s t r a t e s h o o t u p , bo r r o we r s s t a r t e d
de f a u l t i n g , wh i c h r e s u l t e d i n i n c r e a s e d s u ppl y a n d
r e du c e d pr i c e s .

Co n t r a c t i o n o f l i q u i d i t y me a n s n o a g g r e s s i v e l e n di n g ,
wh i c h i n t u r n a f e c t e d r o l l o v e r o f e x i s t i n g l e v e r a g e .

Th i s c a u s e d d o wn wa r d s pi r a l i n g e f e c t o n s t o c k pr i c e .
Th e i mme di a t e c a u s e o r t r i g g e r o f t h e c r i s i s wa s t he bu r s t i n g o f
t h e Un i t e d St a t e s Ho u s i n g Bu b bl e wh i c h pe a ke d i n a ppr o x i ma t e l y
2005 2006.

Al r e a dy -r i s i n g de f a u l t r a t e s o n s u bpr i me a n d Adj u s t a bl e r a t e
mo r t g a g e s (ARM) be g a n t o i n c r e a s e q u i c kl y t h e r e a f t e r .

Ho we v e r , o n c e i n t e r e s t r a t e s be g a n t o r i s e a n d h o u s i n g pr i c e s
s t a r t e d t o dr o p mo d e r a t e l y i n 2006 2007 i n ma n y pa r t s o f t he U.S .,
r e f n a n c i n g b e c a me mo r e di f c u l t .

As h o u s i n g pr i c e s d e c l i n e d , ma j o r g l o ba l f n a n c i a l i n s t i t u t i o n s
t h a t h a d bo r r o we d a n d i n v e s t e d h e a v i l y i n s u bpr i me MBS r e po r t e d
s i gni f c a nt l os s e s .

Fa l l i n g pr i c e s a l s o r e s u l t e d i n h o me s wo r t h l e s s t ha n t he
mo r t g a g e l o a n .
Source: Bloomberg
US Housing Bubble
 IMPACT ON US
Ho u s i n g p r i c e s dr o ppe d 20% f r o mt he i r 2006 pe a k .

To t a l ho me e qu i t y i n t he Un i t e d St a t e s , whi c h wa s v a l u e d
at
$13 trillion at its peak in 2006, had dropped to $8.8 trillion
by mi d -2008 a n d wa s s t i l l f a l l i n g i n l a t e 2008.

The ba n ks de c l a r e d ba n kr u pt c y whi c h l e d t o l a y o f s a n d
t hu s t he u n e mpl o y me n t l e v e l r e a c he d i t s p e a k du r i n g 2008.

Un e mpl o y me n t l e d t o de c r e a s e i n de ma n d , t hu s s u f e r
l o s s e s wh i c h a g a i n c o mpe l l e d f r ms t o de c r e a s e t he
n u mbe r o f e mpl o y e e s a n d t hu s US e n t e r e d i n t o a v i c i o u s
ci r cl e.
By e a r l y No v e mbe r 2008, t h e S&P 500 wa s do wn 45% f r o mi t s
2007 high .

Lo s s e s i n r e t i r e me n t a s s e t s , s a v i n g s , i n v e s t me n t
a s s e t s a n d pe n s i o n a s s e t s s u f e r e d h u g e l o s s e s u p t o
$8 trillion .

By t h e e n d o f Au g u s t 2008, v a r i o u s f n a n c i a l f r ms
a r o u n d t h e wo r l d h a v e wr i t t e n do wn t h e i r h o l di n g s o f
s u bpr i me r e l a t e d s e c u r i t i e s by US $501 bi l l i o n .

By 2008 mo r e a n d mo r e f n a n c i a l f r ms e i t h e r me r g e d ,
o r a n n o u n c e d t h a t t h e y we r e n e g o t i a t i n g s e e ki n g
me r g e r pa r t n e r s .
 Change in US Real GDP, 1948-2009
This has been the worst downturn since end of World War II
Percent (%) Change
15

10

5-
1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014

Growth Rate
Source: Bloomberg
 Causes of Sub - Prime Crisis
Boom And Bust In The Housing Market :
The housingbubble thatburst causedanegative wealth afect onthe
marketaspeoplebegan topanic andthe situation rapidlydeteriorated
on the face of fallingmarket prices.

High - risk Mortgage Loans And Lending /Borrowing Practices :

Credit ratingsweremanipulatedtoreduce the risk levelsof the
mortgagesbycombingnumeroussecuritiesin one large groupknown
asMBSS (Mortgage BackedSecurities). Thishadthe afectof
efectivelyhidingthe risk factorof the loansandallowingbankstosell
themof to investors.
Inaccurate Credit Ratings :

Creditratingswerebeingassignedbycreditratingfrms thatwereinprivate

hands, thesefrmswerebeingpaidbybanksandinordertocontinueagood
relationshipwiththeirclients. Lowlevelriskratings wereassignedtothespecial
investmentvehicles (SIVs) thebankswereusing. AtonepointMoodyhad 40%
ofitsincomecomingfromtheinfowofsuchcreditratingactivities.

Government Policies :

Extremelylowinterestrates, de-regulationandgivingcreditratingauthorityto

theprivatesector.

Boom And Collapse of the Shadow Banking System :

Theshadowbankingsystemswerethemutualfundsandtheir likethatplayedan

importantroleinprovidingfundstocorporationsandother enterprises, however,
theylackedtheregulationandoversightofthebankingindustry.
 Economic Imbalance
Commodity Boom :
Th e de c a d e o f t h e 2000 s s a wa g l o b a l e x p l o s i o n i n p r i c e s , f o c u s e d
e s pe c i a l l y i n c o mmo d i t i e s a n d h o u s i n g , ma r ki n g a n e n d t o t h e
c o mmo di t i e s r e c e s s i o n o f 1980-2000.

I n 2008, t he pr i c e s o f ma n y c o mmo d i t i e s , n o t a b l y o i l a n d f o o d , r o s e s o hi g h
a s t o c a u s e g e n u i n e e c o n o mi c da ma g e , t h r e a t e n i n g s t a g f a t i o n a n d a
r e v e r s a l o f g l o ba l i z a t i o n .

I n J a n u a r y 2008, o i l pr i c e s s u r p a s s e d $100 a ba r r e l f o r t h e f r s t t i me , t he
f r s t o f ma n y pr i c e mi l e s t o n e s t o be pa s s e d i n t he c o u r s e o f t h e y e a r .

I n J u l y 2008, o i l p e a ke d a t $147.30 a b a r r e l .

An i n c r e a s e i n o i l pr i c e s t e n d s t o d i v e r t a l a r g e r s h a r e o f c o n s u me r
s p e n d i n g i n t o g a s o l i n e , whi c h c r e a t e s do wn wa r d pr e s s u r e o n e c o n o mi c
g r o wt h i n o i l i mpo r t i n g c o u n t r i e s , a s we a l t h f o ws t o o i l -pr o du c i n g
s t a t e s .
Source:
Source: New York
Times
Trade:
I n mi d -Oc t o be r 2008, t h e Ba l t i c Dr y I n de x , a me a s u r e
o f s h i ppi n g v o l u me , f e l l by 50 pe r c e n t i n o n e we e k ,
a s t h e c r e d i t c r u n c h ma de i t di f c u l t f o r
e x po r t e r s t o o bt a i n l e t t e r s o f c r e di t .

Unemployment :
Th e I n t e r n a t i o n a l La bo u r Or g a n i z a t i o n pr e di c t s
t h a t a t l e a s t 20 mi l l i o n j o bs a r e l i ke y t o be l o s t by
t h e e n d o f 2009 du e t o t h e c r i s i s mo s t l y i n
"construction , real estate , fnancial services ,
a n d t h e a u t o s e c t o r " br i n g i n g wo r l d
u n e mpl o y me n t a bo v e 200 mi l l i o n f o r t h e f r s t t i me .
Infation :
InFebruary 2008, Reutersreportedthatglobalinfationwasathistoric
levels, andthatdomesticinfationwasat 10-20 yearhighsformanynations.

Excessmoneysupplyaroundtheglobe, monetaryeasingbytheFedto
cultivatedfnancialcrisis, growthsurgesupportedbyeasymonetarypolicy
inAsia, speculationincommodities, agriculturalfailure, risingcostof
importsfromChinaandrisingdemandoffoodandcommoditiesinthefast
growingemergingmarkets.

InfationwasalsogrowingincountriesclassifedbytheIMFas "non-oil-
exportingLDCs" (Leastdevelopedcountries) and "DevelopingAsia", on
accountoftheriseinoilandfoodprices.

Th e pr i c e o f g o l d r o s e by 30% f r o mmi ddl e o f 2007 t o e n d o f

2008.
War :
The recent wars in Afghanistan and Iraq havehad asignifcant role
to play in the causesof the current economic recession.

A current estimate of the totalcost of thewar is $1.6 trillion by the

end of 2009

Massive U.S government borrowing thatcontributed heavily to

thedebt burden of the government and reduced money supply

At the sametime it also added an atmosphere of uncertainty tothe

Middle East causingfearsof disruption to theoil supply and
increasingprice levels.
 Impact of the Crisis
Co l l a ps e o f Fi n a n c i a l I n s t i t u t i o n s in several parts
o f t he wo r l d
Le hma n Br o t he r s ; AI G, Fr e ddi e Ma c a n d Fa n n i e Ma e e t c .

Ce n t r a l Ba n ks i n v u l n e r a bl e c o u n t r i e s s u c h a s I c e l a n d
be c o me Ba n kr u pt

I n v e s t o r s a c r o s s t he g l o be l o s t hu g e a mo u n t o f t h e i r
i n v e s t me n t s

Se v e r e Cr e di t s qu e e z e and Liquidity crunch for the

i ndus t r y
Ho u s i n g ; Au t o mo bi l e s ; Re t a i l ; Se r v i c e s e t c .
 Scale of the potential Net foreign
bailout investment in the
(already up to $850bn) United States (1993
2009)
 Financial Crisis On Stock Market
Stocks lowest since 9/11
Th e Do wi n d u s t r i a l s dropped 504.48 points t o c l o s e a t
10,917.51, the frst time since July its fnished
u n d e r 11,000.

I t wa s t h e s i x t h -l a r g e s t po i n t dr o p e v e r a n d t h e
wo r s t s i n c e Se pt . 17, 2001, wh e n the average fell 684.81 points
o n t h e f r s t d a y o f t r a di n g a f t e r t h e t e r r o r a t t a c ks .

Br o a d e r s t o c k i n di c a t o r s a l s o f e l l .

Th e St a n d a r d &Po o r s 500 i n de x l o s t more than 4 1/2

percent, and the Nasdaq composite index lost more than 3
The End Of The Stock Market Boom ....
Source: Economist Dec,
2008
 ?What Did Governments Do
Intervened in order to prevent a systemic collapse and an
economic depression.

) Governments responded swiftly and decisively to save the system

) Central banks stepped in and provided liquidity to the banking

system allowing it to keep functioning

) Expanded the money supply

) Governments provided bailouts for major financial institutions to

avert their collapse or took them over outright

) Governments also cut taxes and raised spending to prevent the

economy from falling into a deep recession or even depression
 Efects on Developing Countries
Trade And Trade Prices :
Growth in ChinaandIndiahasincreasedimportsandpushedupthe
demand for copper, oilandothernatural resources, which hasledto
greater exportsand higherprices, includingfromAfrican countries.
Eventually, growth in ChinaandIndiaislikelytoslowdown, which
willhaveknockon efectson otherpoorercountries.

Remittances :
Remittancestodevelopingcountrieswilldecline. Therewillbe fewer
economicmigrantscomingtodevelopedcountrieswhen theyare in a
recession, sofewer remittancesandalsoprobablylowervolumesof
remittancespermigrant.
Foreign Direct Investment (FDI ) And Equity Investment :

Thesewillcomeunderpressure. While 2007 wasa recordyearforFDIto

developing countries, equityfnanceisunderpressureandcorporateand

projectfnanceisalreadyweakening. Theproposed Xstratatakeoverofa
South Africanmining conglomeratewasputon hold asthefnancing was
harderduetothecreditcrunch.

Commercial Lending :

Banksunderpressureindeveloped countriesmaynotbeabletolendasmuch

astheyhavedonein thepast. Investorsareincreasingly, factoringintherisk

of someemergingmarketcountriesdefaultingontheirdebt, followingthe
fnancialcollapseof Iceland. Thiswould limitinvestmentinsuch countriesas
Argentina, Iceland, Pakistan and Ukraine.
Aid :
Aidbudgetsareunderpressurebecauseofdebtproblemsandweakfscalpositions,
e.g. intheUKand otherEuropeancountriesandintheUSA. Whilethepromises
ofincreasedaid attheGleneaglessummitin 2005 werealreadyoftrackjustthree
yearslater, aid budgetsarenow likelytobeunder increased pressure.

Whi l e t h e e f e c t s wi l l v a r y f r o mc o u n t r y t o c o u n t r y , t he e c o n o mi c
i mpa c t s c o u l d i n c l u de :

We a ke r e x po r t r e v e n u e s
Fu r t he r pr e s s u r e s o n c u r r e n t a c c o u n t s a n d ba l a n c e o f
pa y me n t
Lo we r i n v e s t me n t a n d g r o wt h r a t e s
Lo s t e mpl o y me n t
The r e c o u l d a l s o be s o c i a l e f e c t s
Lo we r g r o wt h t r a n s l a t i n g i n t o hi g he r po v e r t y
World Economic Growth, 2001-2009 and Projections for 2010 & 2011

Percent (%) Growth

10
9
8
7
6
5
4
3
2
1
0
1-
2-
3-
4-
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Advanced Economies Emerging Economies World Average

Source: IMF WEO Update, January 26, 2010

De c l a r a t i o n o f t h e Su mmi
:Role t int solving
of G 20 a keFinancial c e i n No v e mbe r 2008:
n pl aCrisis

1) To e n h a n c e c o o p e r a t i o n a mo n g t h e n a t i o n s a n d wo r k
t o g e t h e r t o r e s t o r e g l o ba l g r o wt h a n d a c h i e v e n e e d e d
r e f o r ms i n t he wo r l d 's f n a n c i a l s y s t e ms .

2) La y t h e f o u n da t i o n f o r r e f o r mt o he l p t o e n s u r e t h a t a
g l o ba l c r i s i s , s u c h a s t h i s o n e , d o e s n o t h a ppe n a g a i n .

3) To e n s u r e t h a t ma r ke t pr i n c i pl e s , o pe n t r a de a n d
i n v e s t me n t r e g i me s , a n d e f e c t i v e l y r e g u l a t e d
f n a n c i a l ma r ke t s f o s t e r t h e d y n a mi s m, i n n o v a t i o n ,
a n d e n t r e p r e n e u r s h i p t ha t a r e e s s e n t i a l f o r e c o n o mi c
g r o wt h , e mp l o y me n t , a n d po v e r t y r e d u c t i o n .
 Impact on Pakistan
Capital Flows and Workers Remittances :
As t r e s s e d i n t e r n a t i o n a l e c o n o mi c e n v i r o n me n t h a s h e l d ba c k
Fo r e i g n I n v e s t me n t a s i t p o s t e d a de c l i n e o f 47.5 pe r c e n t du r i n g t h e
f r s t t e n mo n t hs o f 2008-09

Wo r ke r s r e mi t t a n c e s t o Pa ki s t a n r e ma i n e d v i g o r o u s a n d u n a f e c t e d
by t he c r i s i s , t o t a l i n g US $ 6.36 bi l l i o n i n J u l y -Ap r i l

Commodity Prices and Trade :

An u n pr e c e de n t e d h i ke i n i n t e r n a t i o n a l c o mmo di t y pr i c e s wr e a ke d
c h a o s o n Pa ki s t a n s e x t e r n a l s e c t o r du r i n g 2007-08, wi t h t h e c u r r e n t
a c c o u n t wi de n i n g s i g n i f c a n t l y .

Ho we v e r , i n t he wa ke o f a r e du c t i o n i n g l o ba l de ma n d a n d t h e
r e s u l t a n t de c r e a s e i n c o mmo di t y pr i c e s , t he i mpo r t b i l l h a s r e d u c e d
s i g n i f c a n t l y , d e c r e a s i n g t he c u r r e n t a c c o u n t de f c i t
 External Financing :

Th e g l o ba l c r i s i s h a s r e s t r i c t e d Pa ki s t a n s a bi l i t y
t o t a p t h e i n t e r n a t i o n a l de bt c a pi t a l ma r ke t s t o
r a i s e f u n ds .

Pa ki s t a n s pr e s e n c e i n t h e i n t e r n a t i o n a l c a pi t a l
ma r ke t s i n
.wa s l i mi t e d 2008-09
 Fiscal Year 2008-09
Ec o n o mi c a c t i v i t y s i g n i f c a n t l y s l o we d d o wn i n 2008-09.

The c u r r e n t a c c o u n t d e f c i t n a r r o we d t o 5.1 p e r c e n t o f GDP .

Ov e r s e a s r e mi t t a n c e s h a v e i n c r e a s e d b u t f n a n c i a l i n f o ws (s u c h
a s FDI a n d p o r t f o l i o i n v e s t me n t ) d r o pp e d s h a r p l y b y o v e r
37 per centdue to macroeconomic instability and global recession .

SBP f o r e i g n e x c h a n g e r e s e r v e s r e b o u n d e d t o a b o u t $9.1 b i l l i o n (2.9

mo n t h s o f i mpo r t s ) by e n d -j u n e 2009

Fi s c a l p r o b l e ms c o n t i n u e d d u r i n g 2008-09 a n d t h e f s c a l de f c i t
t a r g e t wa s 5.2 p e r c e n t o f GDP .

Ov e r a l l r e v e n u e s f e l l s u b s t a n t i a l l y s h o r t o f t h e t a r g e t
p r i ma r i l y d u e t o a d r o p i n t a x r e v e n u e s a s t h e e c o n o mi c s l o wd o wn
r e d u c e d Pa ki s t a n 's t wo ma i n t a x b a s e s -ma n u f a c t u r i n g a n d i mpo r t s
 Current Scenario Across the
:Globe
The wo r l d i s t r y i n g t o r e c o v e r f r o mt he a f t e r ma t h s o f o n e o f
t he Gr e a t e s t Re c e s s i o n s s o f a r wi t h t he de v e l o pi n g
c o u n t r i e s l i ke I n di a a n d Chi n a l e a di n g t he wa y .

The Wo r l d Ba n k pr o j e c t s g l o ba l GDP t o e x pa n d be t we e n 2.9 a n d

3.3 percent in 2010 and 2011, strengthening to between 3.2 and 3.5
pe r c e n t i n 2012, r e v e r s i n g t he 2.1 pe r c e n t de c l i n e i n 2009.

De v e l o pi n g e c o n o mi e s a r e e x pe c t e d t o g r o wbe t we e n 5.7 a n d 6.2

pe r c e n t e a c h y e a r f r o m2010-2012.

Hi g h -i n c o me c o u n t r i e s , ho we v e r , a r e pr o j e c t e d t o g r o wby
be t we e n 2.1 a n d 2.3 pe r c e n t i n 2010n o t e n o u g h t o u n do t h e 3.3
pe r c e n t c o n t r a c t i o n i n 2009f o l l o we d by be t we e n 1.9 a n d 2.4
pe r c e n t g r o wt h i n 2011.
 Alternative View
Takenstrong actionstostimulatetheeconomies, provideliquidity, strengthen
thecapitaloffnancialinstitutions, protect savings anddeposits, unfreezecredit
markets, andtoensurethatInternationalFinancialInstitutions (IFIs) can
providecriticalsupportfortheglobaleconomy.

Recognizetheimportanceofmonetarypolicysupport, asdeemedappropriate
todomesticconditions.

EnsurethattheIMF, WorldBankhavesufcientresourcestocontinueplaying
theirroleinovercomingthecrisis.

Reviewingandaligningglobalaccountingstandards, particularlyforcomplex
securitiesintimesofstress.
 Governments and CentralBanks aroundtheworldmust beactivein supervising
and monitoring theactivitiesoffnancialfrms locallyandinternationally.

InternationalMonetary Fund (IMF) shouldplaya major rolein regulatingand

auditing theglobalfnancialsystem.

Investmentcompanies shouldbepunishedfor conductingunfair practicesin

somecountries (TaxEvasion) andfnancialpracticesmust beconsistent
globally.

Restricttheleverage thatfnancial institutions can assume.

Establishanearly-warningsystem tohelpdetect systemicrisk.

Requirestrongercapitalandliquiditypositionsforfnancialfrmsand
relatedregulatoryauthority.
 Conclusion
Th e r e c e s s i o n o f 2007-09 wa s c o n s i d e r e d t o be s e v e r e , a l l t h i s
s h o we d u s wa s t h e n e e d f o r s t r o n g g o v e r n me n t r e g u l a t i o n a n d
o v e r s i g ht o f t h e ma r ke t i n c o mp a r i s o n t o a c o mp l e t e l y f r e e
ma r ke t s c e n a r i o .

Ba i l o u t p a c ka g e s wi l l be n e f t t h e f r ms o n l y i n t he s ho r t r u n . A
f r mwi l l n e e d t o a s s e s s i t s f n a n c i a l p o s i t i o n a n d n e e d t o t a ke
c o r r e c t i v e a c t i o n t o p r e v e n t s u c h c i r c u ms t a n c e s i n t h e f u t u r e .

Th e q u e s t i o n o f Gl o ba l Ec o n o mi c Re c o v e r y t a ki n g pl a c e i s h i g h l y
de ba t a b l e h o we v e r , we c a n c o n c l u de t ha t t h e r e c o v e r y i s i n d e e d
t a ki n g p l a c e .

Th e r o a d t o r e c o v e r y i s n o t s mo o t h a n d wi l l t a ke a l o n g t i me
be f o r e t h i n g s g e t s t a b i l i s e d a n d e v e r y t h i n g i s b a c k t o n o r ma l .
Thank You !!