Conference on Global Financial Crisis: Impacts, Lessons, and Growth Rebalancing

The conference on Global Financial and Economic Crisis: Impacts, Lessons, and Growth Rebalancing was successfully held in Tokyo, 22–23 April 2009. The one-and-a-half-day conference covered three thematic areas: (i) macroeconomic impacts of the global economic and financial crisis on trade, foreign direct investments, employment, and finance; (ii) lessons from previous crises; and (iii) prospects for growth rebalancing, particularly promoting local drivers of growth.

The conference started with a session on the crisis management experience of Japan and Sweden, and offered lessons for the United States (US). Early recognition of the severity of the crisis was emphasized in Japan's experience so as to elicit decisive policy actions preventing a drawn out recovery. Sweden offered its framework of bank resolutions and noted the need to adapt it to the specificities of the respective countries in which the framework would be used. Both cases stressed the importance of transparency in the conduct of government responses.

The next session discussed the unfolding of the crisis in the US and Europe, and discussed the effectiveness of their respective responses. Prompt fiscal stimulus in the US has so far resulted in some glimmers of hope but banks' resolutions would mainly determine whether the US has really turned a corner. Europe's single currency, the euro, has so far served the continent well by removing speculative currency attacks. It was argued that the severity of the crisis could have been less in Europe had collective decision-making been more flexible in the eurozone.

In the session on the macroeconomic impacts of the current crisis on Asian economies, the Asian Development Bank (ADB) revealed that this year's gross domestic product (GDP) growth projection for the region was a modest 3%. However, ADB's outlook for 2010 is better; and added that the growth forecast would likely double provided that banks remained resilient. A study by the International Monetary Fund pointed out that financial stresses make recessions particularly longer and deeper. Thus, it suggested that Asia must give the utmost attention to safeguarding the stability of its banking system at all costs.

The succeeding three sessions discussed crisis development and responses in Asian countries, including the People's Republic of China (PRC); Taipei,China; Thailand; Malaysia; Republic of Korea; and India. Asian countries were deemed generally in better shape prior to the crisis than were other countries, owing mainly to the reforms undertaken in the aftermath of the 1997 Asian currency crisis. Governments had prudent fiscal policies, ample foreign reserves, and healthy financial systems, and had tempered inflation. The crisis mainly hit production in export-dependent sectors and authorities responded by easing monetary conditions complemented by fiscal stimulus packages. As the major export markets—namely, the US and European countries—will take time to fully recover and that consumption as a percentage of GDP will not likely go back to their pre-crisis levels, export-led recovery of the 1997–1998 financial crisis is unlikely to work this time. Thus, Asian economies need to look for new drivers of growth such as expansion of domestic and regional demand.

In the panel discussion, panelists stressed the point that pre-crisis growth rates are unlikely to return in the long run; in the short run, countries should brace themselves for an economic slowdown in the next two years. As the poor bear most of the brunt of any crisis, governments must ensure that their respective welfare systems address their basic needs. On the macroeconomic level, governments should be actively engaged in coordinating their national policy responses to enhance their effectiveness, ushering in a new era of a more dynamic and integrated Asia.