Financial Capabilities Of Households Group 4 Final.Ppt


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Presentation contains a summary of households financial capabilities with actual data available in Oct 2009. Four countries considered by the team, Hungary, Korea, Iran, Yemen.

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Financial Capabilities Of Households Group 4 Final.Ppt

  1. 1. Financial Capabilities of Households Subject 4 eMBA – Goup 9 2009 Hussam Al-Hureibi, Mashid Moradi ,Philip You, Attila Sárkány
  2. 2. 1. Study of influential factors 1.1 Word Economic Outlook 1.2 Country level economic Outlook Subjects will be presented in light of the economic crisis.
  3. 3. 1.Influential Factors 1.1 Word Economic Outlook Economic crisis. Emerging markets (1)
  4. 4. 1.Influential Factors 1.1 Word Economic Outlook Economic crisis. Emerging markets (2) Central –East Europ bacame the epicenter of econimic crisis after stop of external bank flows.
  5. 5. 1.Influential Factors 1.1 Word Economic outlook Influence factors to household financial situation in emerging market countries. Before crisis : Asset prices decoupled from developments. (not real) During crisis Sudden Lock up in financial markets. Stop of bank inflows to emerging markets. Increased vulnerability of households.
  6. 6. 1.Influential Factors 1.2 Country level Economic outlook Hungary (1) •Political influence. •Monetary policy •Immediate impact on house holds. •False short term effects. •No long term improvement
  7. 7. 1.Influential Factors 1.2 Country level Economic outlook Hungary (2) – IMF & WEO Growth projections Before and after crisis Growth projections by counties involved in improvement programs.
  8. 8. 1.Influential Factors 1.2 Country level Economic outlook Hungary (3) – National Bank – Interest rates. 14,00 12,00 10,00 8,00 Direct influence household 6,00 capabilities. 4,00 Reflection of economy 2,00 performance and monetary 0,00 interventions to the market 2002.01.01 2002.05.01 2002.09.01 2003.01.01 2003.05.01 2003.09.01 2004.01.01 2004.05.01 2004.09.01 2005.01.01 2005.05.01 2005.09.01 2006.01.01 2006.05.01 2006.09.01 2007.01.01 2007.05.01 2007.09.01 2008.01.01 2008.05.01 2008.09.01 2009.01.01 2009.05.01
  9. 9. 1.Influential Factors 1.2 Country level Economic outlook Hungary (4) Consumer price indices are only influenced by the tax increase CPI falls 1% under expectation. Continued down trend. Projections show below 2% at the end of 2010.
  10. 10. 1.Influential Factors 1.2 Country level Economic outlook Hungary (5) ! •Better correlation to household capabilities •2003 - 2007 strugle •Measures taken to improve capabilities failed •Delayed willingness to come back •Negative impact on households
  11. 11. 1.Influential Factors 1.2 Country level Economic outlook Hungary (6) Government debt as % of GDP •In 2009 government financing has been covered from savings and short term loans •Local Municipality costs have been covered from savings, equities and increased debt
  12. 12. 1.Influential Factors 1.2 Country level Economic outlook Hungary (7) Stock exchange market BUX Index 35 000,00 30 000,00 25 000,00 •No direct correlation to 20 000,00 BUX governemnt capbilities 15 000,00 10 000,00 •Could be a reflection of 5 000,00 0,00 househod mood. 2004.01.05 2004.04.05 2004.07.05 2004.10.05 2005.01.05 2005.04.05 2005.07.05 2005.10.05 2006.01.05 2006.04.05 2006.07.05 2006.10.05 2007.01.05 2007.04.05 2007.07.05 2007.10.05 2008.01.05 2008.04.05 2008.07.05 2008.10.05 2009.01.05 2009.04.05 2009.07.05
  13. 13. Financial Capabilities of Household in Hungary Definition of household “Household is a group of people who independently of their degree of familiar relation are forming one common income and expense entity in which they bear partially or totally together the everyday life expenses.” Under this definition, household are linked much less by familiar links but rather by economical links. It is also possible for one single person to form a stand alone household entity. As a consequence of the definitions households are not linked by common living area and includes those in to the same entity who are temporarily away (for studies or work) but they are maintained from the same spending or their income will be part of the common expense.
  14. 14. Financing capability of households ? Households' financing capacity is the difference between gross savings and borrowings Gross Savings - Borrowing
  15. 15. Hungarian Household Financial Capabilities " #$ % ! The Hungarian household financial capabilities are on a downturn with apparent 6 month delay to the economic crisis
  16. 16. Hungarian Household Financial Capabilities Borrowing 2009 June Aggregate Fx debts repaid exceeds new loans
  17. 17. Hungarian Household Financial Capabilities New Mortgage Loans / FX loans •Banks withdrawn from the Fx loan market •New loans increase. •Banks reconsider risks. •Households reconsider risks
  18. 18. Hungarian Household Financial Capabilities Consumer & Housing Loans Loans stay low during crisis. Uptrend after crisis in HUF loans. Quick overtake of CHF loans by Eur housing loans. Uptrend in HUF housing loans during after crisis. No real down trend during the crisis of HUF housing loans.
  19. 19. Hungarian Household Financial Capabilities
  20. 20. Hungarian Household Financial Capabilities HUF FX Total There is an effort for new deposits right at the start of crisis
  21. 21. Hungarian Household Financial Capabilities Real growth is favorized by bank incentives for HUF deposits.
  22. 22. Hungarian Household Financial Capabilities Disconnect between government financial capability and household behavior. Change in trend cause by economical crisis. Significant amount of loans in foreign currency.
  23. 23. Hungarian Household Financial Capabilities Financial capabilities by economical sectors Corporations Government Households
  24. 24. LG– {–›ˆ“ “–ˆ•š – –œšŒ–“‹ ˆš LG– nkwUG j–•š–“‹ˆ›Œ‹ Šˆ›ŒŽ–™Œš Housing loans in FX Housing loans in HUF Other FX loans Other HUF loans Increase in FX loans after year 2000 Trend is turning back following the economical crisis.
  25. 25. Hungarian Household Financial Capabilities Reaction to economic crisis Does not have financial plan Does have financial plan Always had a since the start financial plan of crisis
  26. 26. Hungarian Household Financial Capabilities Main Characteristics 2nd Qtr 2009 one year capability was 2,6 % GDP. 2nd Qtr 2009 is reaching as low as 0,4 % GDP Increase in savings offset by withdrawal from Stock market and investment funds. 3rd Qtr 2009 Draining of savings. No access to loans. Value of FX loans have decreased due to HUF rate improvements.
  27. 27. 1.Influential Factors 1.2 Country level Economic outlook South Korea Korea Economy - Overview Type Description Population 48.46 million (2007) (foreign residents: 1.1 million) Economically active population 24.2 million (2007) Gross Domestic Product (GDP) $ 969.6 billion (2007) Per Capita GNI $ 20.045 (2007) GDP Growth Rate 5.5 percent (2007)
  28. 28. South Korea Korea has been rapidly integrating itself into the world economy since the onset of the 1997 financial crisis. The Government has advanced a new paradigm that involves upgrading business practices to international stands, promoting human resources and technology development and enhancing institutional efficiency.
  29. 29. GDP South Korea is a major economic power and the South Korean economy is one of the four largest in Asia with Gross Domestic Product (GDP) measured on purchasing power parity basis at $ 1.2 trillion. The nation has one of the highest GDP per capita in Asia, more than $ 20,000 according to the International Monetary Fund. South Korea GDP Growth Rate
  30. 30. Household Debt in Korea Currently, the total household debt is 802 trillion won (approximately 68 billion USD). Although, Korea is not the epicenter of the global financial crisis, the government took on such strong measures as drastic rate cuts, massive liquidity injection and deregulations of the real estate market. The Bank of Korea lowered its benchmark rate by 3.25 percentage points to 2.0% in early 2009 from 5.25% in late 2008. In addition, it reclassified speculative housing investment and overheated speculative investment zones with the exception of main city centre, in an effort to revitalize the sluggish real estate market. This contributed to the sharp increase in home equity lone.
  31. 31. Household Debt in Korea The debt of the Korean households reached 82 percent of GDP in 2007
  32. 32. The main reason of Household Debt The main reason •Household Debt is home ownership decision of household •Low Interest rate (current interest rate 5.63% on housing loan.)
  33. 33. The average monthly expenditure per house household The average monthly income per household amounted to 3,299 thousand won (approximately $ 2,800 USD) in 2009. The housed expenditure per household marked 2,663 thousand won (approximately $ 2,200 USD) in 2009.
  34. 34. Private Consumption Even if the private consumption rate has been decreased, consumption on Education section is never decreased.
  35. 35. Saving Rate Over the past few years, the nation’s savings rate has continued to decline as consumption grew at a much faster pace than income amid low interest rates.
  36. 36. Unemployment rate The total number of works hired decreased year –on-year affected by low employment in the private sector in particular manufacturing and construction due to the global crisis driving sluggish domestic demand and falling export. In Korea, the current unemployment rate is 3.7%.
  37. 37. Unemployment Rate & share of employed by industry Every year, the trend of employed by industry has been change that manufacturing sector which is Korea foothold to develop the economy is decreasing while the service industry (e.g healthcare & social welfare services, real estate & renting services and financial & insurance services)) is continue to grow up with year-on-year. The main reason of decline in manufacturing sector is due to the high competitiveness and low margin which can not sustain the businesses afloat in the market.
  38. 38. pš“ˆ”ŠGyŒ—œ‰“ŠG–Gp™ˆ• w–—œ“ˆ›–•Ga^[SX`]SWWWGOYWW` Œš›”ˆ›ŒGP Ot–™ŒG›ˆ•G›ž–T›™‹šG–G›ŒGp™ˆ•ˆ•šGˆ™ŒGœ•‹Œ™G›ŒGˆŽŒG–G ZWP nkw OwwwPGYWW_ Œš›”ˆ›ŒG T {–›ˆ“GK_WUZ]G‰““–• T wŒ™GŠˆ—›ˆGKXXSWY nkwO•–”•ˆ“PGYWW_ Œš›”ˆ›ŒG nkw T {–›ˆ“GKZZUYZZG‰““–• T wŒ™GŠˆ—›ˆGK[S]WW
  39. 39. p™ˆ•NšGŒŠ–•–”  {ŒGŒŠ–•–” GšGŠŒ•›™ˆ““ G—“ˆ••Œ‹SG™Œ“ •ŽG Œˆ“ G–•GŒT Œˆ™G—“ˆ•šUGo–žŒŒ™SG›ŒG Ž–Œ™•”Œ•›GšG›ˆ’•ŽG”Œˆšœ™Œ‹Gš›Œ—šG›–žˆ™‹G ›šGŒš—–œšŒ‹GŽ–ˆ“šG–GŒŠ–•–”ŠG“‰Œ™ˆ“¡ˆ›–•G ˆ•‹G•“ˆ›–•TŽ›•ŽU p™ˆ•NšGŠŒGš–œ™ŠŒG–G–™ŒŽ•GŠœ™™Œ•Š GšG›ŒG šˆ“ŒG–G–“Gˆ•‹GŽˆšbGˆšGˆG™Œšœ“›SG›ŒGŒˆ“›G–G ›’šGŒŠ–•–” G‹Œ—Œ•‹šGœ—–•G—™ŠŒšG–™G›–šŒG c–””–‹›ŒšGˆ•‹G–•G›ŒGš¡ŒG–G›šG–“G˜œ–›ˆšG œ•‹Œ™GvwljU
  40. 40. p•›Œ™•ˆ›–•ˆ“GŠ–•ŠŒ™•G. EŠ–•–”Š šˆ•Š›–•šG ˆŽˆ•š›G›ŒGŠ–œ•›™ UG ŒŠ–•–”  S›ˆ›ŒT‹–”•ˆ›Œ‹GŒŠ–•–”  ˆ•‹GˆšGŽ™Œˆ›“ G ŒŸ—ˆ•‹Œ‹GŽ–Œ™•”Œ•›Gš—Œ•‹•ŽUG oŽGž–™“‹G–“G—™ŠŒšGˆŒGšŽ•Šˆ•›“ G ‰––š›Œ‹G–“GŒŸ—–™›G™ŒŒ•œŒšSGžŠG—™–‹ŒG ˆ‰–œ›G_G—Œ™ŠŒ•›G–GŽ–Œ™•”Œ•›G™ŒŒ•œŒšSG ŒŠ–•–”  p™ˆ•’šGŒŠ–•–”  ™Œ”ˆ•šG‰œ™‹Œ•Œ‹G‰ G ŽGœ•Œ”—“– ”Œ•›SG ™š•ŽG•“ˆ›–•SG Š–™™œ—›–•SG Š–š›“ Gšœ‰š‹ŒšSG •Š™Œˆš•Ž“ G‰“–ˆ›Œ‹Gˆ•‹G•ŒŠŒ•›G—œ‰“ŠGšŒŠ›–™U
  41. 41. p™ˆ•Gnkw GDP - real growth rate This entry gives GDP growth on an annual basis adjusted for inflation and expressed as a percent.
  42. 42. w™ŠŒG{™Œ•‹GT p•“ˆ›–•Gyˆ›ŒG•Gp™ˆ• Consumer Price Index Annual Change Definition: This entry furnishes the annual percent change in consumer prices compared with the previous year's consumer prices.
  43. 43. kŒ‰›GT ŒŸ›Œ™•ˆ“ $21.92 billion (31 Dec 2008 est.) $20.68 billion (31 Dec 2007 est.) The Iranian government has made debt reduction one of its top priorities. Iran was forced to reschedule much of its foreign debt in 1992. Since then, it has been diligently paying off what it owes, in an effort to improve access to longer-term financing. As a result, Iranian letters of credit are much better received now than they were two years ago.
  44. 44. p™ˆ•NšGœ•Œ”—“– ”Œ•› ™ˆ›Œ šŒ›G›–G p™ˆ•NšG ™šŒ p™ˆ• ˆšGˆG—–—œ“ˆ›–•G–G–Œ™G^[G”““–•SG t–™ŒG›ˆ•G›ž–T›™‹š –GžŠGšGœ•‹Œ™G›ŒGˆŽŒG–GZWUG –™ŒG›ˆ•G›ž–T |—G›–G^WSWWWG—Œ–—“ŒGŒ•›Œ™Gp™ˆ•NšG“ˆ‰–™G”ˆ™’Œ›GŒˆŠG Œˆ™UG |•Œ”—“– ”Œ•› yˆ›Œ XYULGOYWW_GŒš›UP XYULG Š–œ•›™ GŠ–”—ˆ™š–•G›–G›ŒGž–™“‹aGX[W XYLGOYWW^GŒš›UP XYLG
  46. 46. h••œˆ“GhŒ™ˆŽŒGp•Š–”ŒG—Œ™G h••œˆ“GhŒ™ˆŽŒGuŒ›G o–œšŒ–“‹ lŸ—Œ•‹›œ™ŒG—Œ™Go–œšŒ–“‹
  47. 47. hŒ™ˆŽŒGm––‹GlŸ—Œ•‹›œ™ŒG zˆ™Œ
  48. 48. s–ˆ•š VGt–™›ŽˆŽŒš hˆ“ˆ‰“ŒG–•“ G–™G•ˆ›ŒG—Œ–—“ŒGž›G p™ˆ•ˆ•GpkUG {Œ™ŒGˆ™ŒG›ž–G› —ŒšG–G“–ˆ•ša XP s–ˆ•šG‰ GŽ–Œ™•”Œ•›aGs”›Œ‹G“–ˆ•šGO™Ž›G •–žGœ—G›–GYSWWWG|zkG–™GˆG–œšŒG‰œ“›G“ŒššG ›ˆ•GXWG Œˆ™šPG›ŒG•›Œ™Œš›G™ˆ›ŒGšG™–œŽ“ G XXL YP w™ˆ›ŒG‰ˆ•’šaGoˆŒG•–G“”›G•G“–ˆ•šSG›Œ G œšœˆ““ G“Œ•‹Gœ—G›–G^WLG–G›ŒGˆ“œŒG–G›ŒG —™–—Œ™› UG{ŒG•›Œ™Œš›G™ˆ›ŒGšG™–œŽ“ GY[L
  49. 49. p•›Œ™Œš›G™ˆ›ŒG–™ŒŠˆš›G Iranian government should reform the monetary policy to accelerate the economy and provide better options for households by low-interest rate in housing loan and secure the job for young generation.
  50. 50. 1.Influential Factors 1.2 Country level Economic outlook Yemen Yemeni Economy – overview €Œ”Œ•GšGˆG—––™GŠ–œ•›™ Gˆ•‹G›ŒG™Œ—œ‰“ŠG–G€Œ”Œ•GžˆšG–™”Œ‹G•GX``WU €Œ”Œ•GšGˆG—––™GŠ–œ•›™ Gˆ•‹G›ŒG™Œ—œ‰“ŠG–G€Œ”Œ•GžˆšG–™”Œ‹G•GX``WU hŒ™ˆŽŒGˆ••œˆ“GŽ™–ž›G™–”GYWWWTYWW^GšGZT hŒ™ˆŽŒGˆ••œˆ“GŽ™–ž›G™–”GYWWWTYWW^GšGZT[LU t–š›G–G€Œ”Œ•’šG•Š–”ŒGšG™–”G–“GŒŸ—–™›šGžŠGŠ–•›™‰œ›ŒG›–Gˆ™–œ•‹G`WLG–GG ›ŒG›–›ˆ“GŠ–œ•›™ G•Š–”ŒU {ŒG‹™–—G–G–“G—™ŠŒšGˆ•‹G›ŒG‹ŒŠ™ŒˆšŒG–G–“G—™–‹œŠ›–•GŒŒŠ›Œ‹G›ŒG€Œ”Œ•šGGGG {ŒG‹™–—G–G–“G—™ŠŒšGˆ•‹G›ŒG‹ŒŠ™ŒˆšŒG–G–“G—™–‹œŠ›–•GŒŒŠ›Œ‹G›ŒG€Œ”Œ•šGGGG ŒŠ–•–” GŽ™Œˆ›“ U o–žŒŒ™G›Œ™ŒGˆ™ŒGˆ››Œ”—›šG™–”G›ŒGŽ–Œ™•”Œ•›G›–G‹Œ™šŒG›šGŒˆ™••ŽšG™–”GGGGGG o–žŒŒ™G›Œ™ŒGˆ™ŒGˆ››Œ”—›šG™–”G›ŒGŽ–Œ™•”Œ•›G›–G‹Œ™šŒG›šGŒˆ™••ŽšG™–”GGGGGG ˆŽ™Šœ“›œ™ŒG—™–‹œŠ›šG”–š›“ GšGˆ•‹GŠ–ŒŒGˆ“–•ŽGž›G•ˆ›œ™ˆ“GŽˆšG—™–‹œŠ›–•U ˆŽ™Šœ“›œ™ŒG—™–‹œŠ›šG”–š›“ GšGˆ•‹GŠ–ŒŒGˆ“–•ŽGž›G•ˆ›œ™ˆ“GŽˆšG—™–‹œŠ›–•U hšGˆG™Œšœ“›G–G›ŒG—™–Ž™ˆ”SG•›Œ™•ˆ›–•ˆ“G‹–•–™šG—“Œ‹ŽŒ‹Gˆ‰–œ›GKG‰““–•G–™GGGGGGGG hšGˆG™Œšœ“›G–G›ŒG—™–Ž™ˆ”SG•›Œ™•ˆ›–•ˆ“G‹–•–™šG—“Œ‹ŽŒ‹Gˆ‰–œ›GKG‰““–•G–™GGGGGGGG ‹ŒŒ“–—”Œ•›G—™–‘ŒŠ›šSGˆšGˆG™Œšœ“›G“˜œŒŒ‹G•ˆ›œ™ˆ“GŽˆšGˆŠ“›  šGšŠŒ‹œ“Œ‹G›–GGGGGG –—Œ•G•GYWW`G
  51. 51. v“G—™–‹œŠ›–•G™–”GYWWZG›–GYWW`
  52. 52. Loans per family SFD (Social Fund for Development) is responsible for giving loans in Yemen with World Bank assistance (IDA credit) $75 million * Amount of average micro loan per family: $109–$271 * Number of micro loan recipients in Yemen: 25,000 * The responsible for giving loans in Yemen is the SFD (Social Fund for Development), with the help of World Bank (IDA credit) * The total project cost: $175 million , ($75 million World Bank assistance) Type of loans that are most specific Small Business Loan Personal Loan Farming Loan
  53. 53. Household income or consumption by percentage share Lowest 10%: 3%, Highest 10%: 25.9%. (2005) About interest in Yemen The monthly interest in Yemen is about only 2% Such services were not common in the market because of religious and commercial reasons which made people mistrustful towards the services in the beginning. (Islamic banks are not charging interest over the credits extended to the microfinance associations)
  54. 54. Investments of households in YEMEN The most important opportunities among the many attractive investments are : * in utilizing natural Recourses, (such as 1. Cement production facility 2. Ammonium Nitrate Fertilizers 3. Wall Tiles production) * in Agriculture, (such as 1. Starch production 2. Vegetable oil production 3. Coffee grinding and packaging) * in Tourism (such as 1. Developing coastal resorts 2. Tourists transportation vehicles /Air and Land/) * and in many others (such as Glass manufacturing, Cement manufacturing, Car assembly, Household electric appliances, Iron fusion and other iron products, etc.)
  56. 56. Hungarian Household Financial Capabilities Plans of Hungarian households. Does not plan to start savings Did not start savings but have plans to do so. Have decreased their spendings
  57. 57. World financial outlook projections Massive increase in deficiencies has been prevented in countries acting under IMF improvement programs
  58. 58. Public debt dynamics Hungary stands out as a country with significant debt substainability problem
  59. 59. Hungarian fiscal structural reforms affecting household capabilities. •Pension system reform •Social transfers •Subsidies •Tax and spending reforms •Shift the burden from labor to consumption. •Boost labor participation and potential growth. •Institutional reforms. Fiscal responsibility law. Debt restructuring •Exchange rate stability programs. •Partial mortgage guaranty
  60. 60. Hungarian governmental decisions adversely affecting households Eliminating without phasing out: subsidies to home buyers. energy subsidies. Containing the wage growth in the public sector. Encouraging efficiency gain in the public service area.
  61. 61. Scope of Hungarian governmental protection schemes for households. Provide incentives to reduce depth burdens Safeguard credit discipline Minimize liabilities to public financing Extend mortgage debt financing. Temporary Lower Burden
  62. 62. Future improvement of household - Korea •Real estate price need to be stabilized in a bid to slow down the sharply accelerated growth of household loans. •The saving ratio needs to be raised by improving the income situation of households through active job creation and guarantee job security. •The social safety net for the less-privileged, including low-income groups and the elderly, needs to be strengthened to counter the sharp contraction of household consumption during economic downturns. * Stabilizing financial markets, improving consumer sentiment, and easing inflationary pressure are necessary tasks has to be taken in order to contribute to the recover of consumer spending.