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Current Global Financial Crisis and Its Implications on International Financial Institutions: The Case in
Malaysia
( Rafael Nadal )
Nor Akirah bt Ramli BG09110405
Hafizah bt Hanafi BG09110146Hafizah bt Hanafi BG09110146
Mardhiawaty bt Malik BG09110254
Mas Suraeda bt Ghani BG09110162
Norhaini bt Masa BG09110021
Siti Ayu bt Kurio @ Drahman BG09110102
Outline
� Introduction
�Objective
�Impact on Malaysia�Impact on Malaysia
�Steps taken by Malaysia
�Effectiveness of steps
�Conclusion
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 trade
2. Channel of finance2. 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: IMFinstitutions. 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
Objectives
1. To determine the impact of global financial crisis in
Malaysia
2. To examine the steps taken by Malaysia in order to2. To examine the steps taken by Malaysia in order to
overcome the global financial crisis
3. To determine the effectiveness of the steps that has been
taken by Malaysia
Impacts of Global Financial Crisis to Malaysia
a) 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 goods
d) 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 employment
f) Impact on inflation rate
Steps taken by Malaysia
Malaysia peg the value of money so do not experience
continued fall in an uncertain world market
Malaysian government has freeze the assets of foreign
investors in Malaysia Ringgit
Government refused to request financial assistance from the IMF
funds
Transformation including the rationalization of the existing
institutions, the establishment of new institutions and
introduction of foreign competition
Cont….
�
Consolidate the banking sector through mergers and acquisitions
and increased capitalization
Reduce reliance on the existing financial market system and see this crisis as an opportunity to
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.
• Additional fluctuations driven by procyclical
fiscal policy has been found to weaken the long
term growth.
Expansionary fiscal policy
term growth.
• Can be adopted as a general policy response
• To accept the fact that the adjustment is not
inevitable and is intended to reduce pain and
promote the orderly adjustment.
Stabilization and stimulus
Cont….
• Need to be timely, large, lasting,
diversified, contingent, collective and
sustainable to reduce probability another
“Great Depression”
Optimal fiscal
package
“Great Depression”
• Occurs because the stimulus package failed to
address critical structural weaknesses
mentioned earlier.
• Stimulus private spending to replace public
spending.
Fiscal stimulus
package
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
MalaysiaMalaysia
Early transformation in the Malaysian financial and economic
from the current global financial crisis
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, as
its economy has shown positive signs in recovering from the crisis as
early as in year 2010