Current Global Financial Crisis and Its Implicationson International Financial Institutions: The Case in Malaysia ( Rafael Nadal )Nor Akirah bt Ramli BG09110405Hafizah bt Hanafi BG09110146Mardhiawaty bt Malik BG09110254Mas Suraeda bt Ghani BG09110162Norhaini bt Masa BG09110021Siti Ayu bt Kurio @ Drahman BG09110102
OutlineIntroductionObjectiveImpact on MalaysiaSteps taken by MalaysiaEffectiveness of stepsConclusion
Introduction• Global - a planet, the world, the world of the whole earth, is not limited or regional in scope.• Financial crisis - situations in which some financial institutions or assets suddenly lose a large part of their value• International financial institutions (IFI) -public banks and other credit institutions “owned” by more than one country
• There are other factors that caused global financial crisis including free market ideology, etc.• This crisis spread to Malaysia via two-way :1. Channel of trade2. Channel of finance• IFI and Malaysia have each experienced a number of impacts. Several major financial institutions taken over by other financial institutions.
• Effects of Global financial crisis to IFI: banks, investment houses, and insurance companies have either announced bankruptcy banks in the developing economies suffer contractions in credit lines and reduced financial flows due to the failure of leading financial institutions. Eg: IMF five of America’s largest investment banks have been reborn as commercial banks UBS and Citigroup, have announced huge losses. collapse of the banking system in Iceland, the fall of Fortis which a Belgo-Dutch Bank
• almost all of the financial institutions in the United States and other parts of the world including international level such as Iceland, Hungary, Country Ukraine, and other Easter European and Baltic endured heavy losses from their collateralized debt obligations (CDO’s), credit default swaps (CDS’s), and other financial assets
Objectives1. To determine the impact of global financial crisis in Malaysia2. To examine the steps taken by Malaysia in order to overcome the global financial crisis3. To determine the effectiveness of the steps that has been taken by Malaysia
Impacts of Global Financial Crisis to Malaysiaa) GDP growth rate
Cont….b) Malaysia’s export reduction in the values of a continuous drop in Exports, not only AFFECTED industrial production in export-oriented sectors, but also indirectly from the making and the lack of domestic demand and other services.c) Imports of intermediate goodsd) Impact on investment a surge in bank outflows have a negative impact on other investment net outflows of Recorded 11 billion lower than the previous year with a net outflow of RM46.9 billion.e) Impact on employmentf) Impact on inflation rate
Steps taken by Malaysia Malaysia peg the value of money so do not experience Malaysian government has continued fall in an uncertain freeze the assets of foreign world market investors in Malaysia Ringgit Transformation including the rationalization of the existing Government refused to request institutions, the establishment offinancial assistance from the IMF new institutions and funds introduction of foreign competition
Cont…. Reduce reliance on the existing Consolidate the banking sector financial market system and seethrough mergers and acquisitions this crisis as an opportunity to and increased capitalization introduce Islamic financial system Trade relations with China Providing own stimulus package
Effectiveness of steps • To maintain exchange rate stability as a policy to reduce the policy option. Expansionary • Additional fluctuations driven by procyclical fiscal policy fiscal policy has been found to weaken the long term growth. • Can be adopted as a general policy responseStabilization and • To accept the fact that the adjustment is not stimulus inevitable and is intended to reduce pain and promote the orderly adjustment.
Cont…. • Need to be timely, large, lasting,Optimal fiscal diversified, contingent, collective and package sustainable to reduce probability another “Great Depression” • Occurs because the stimulus package failed to address critical structural weaknessesFiscal stimulus mentioned earlier. package • Stimulus private spending to replace public spending.
Conclusion Global financial crisis did not have a very significant impact on Malaysia This is shown by the quick recovery that Malaysia has displayed, whereby the Malaysian economy has improved compared to when the global financial crisis initially hit Malaysia Early transformation in the Malaysian financial and economic sectors following the Asian financial crisis has also helped to better prepare Malaysia in absorbing the shocks that resulted from the current global financial crisis Overall, the steps taken by Malaysia have served the country well, asits economy has shown positive signs in recovering from the crisis as early as in year 2010