Article
Middle powers in the region will keep hedging between Washington and Beijing. It’s in the great powers’ interests to play along.
Amr Hamzawy, Kathryn Selfe
Source: Getty
Article
The Unequal Impact of the Economic Crisis
Large industrialized nations like the United States, Japan, and Germany have benefited from increasing global demand for relatively stable economies in which to invest.
Published on Jul 9, 2009
Leaders of the G8 nations meeting in L'Aquila Italy acknowledged in a joint statement that there are signs the world economy is stabilizing, but cautioned that "significant risks remain."
Analysis from Carnegie's International Economic Bulletin supports this conclusion, finding that although the preconditions for economic recovery have begun to develop, it is still too early to say that a sustained global recovery is imminent.
The Bulletin explores how the impact of the crisis and the chance for recovery vary in regions around the world, with a particular focus on Africa, Central Asia, China, the Middle East, and Russia. It shows that although the United States is at the epicenter of the global economic crisis, it is one of the countries least affected by the financial fallout. Large industrialized nations like the United States, Japan, and Germany have benefited from increasing global demand for relatively stable economies in which to invest. Instead, it is several developing countries, notably those with vulnerable capital accounts and weak macroeconomic fundamentals, that are experiencing severe economic downturns disproportionate to their roles in the crisis.
Top 10 Most Affected Countries: Sept. 2008–May 2009
| Rank | Country | Currency Depreciation(%) | Equity Market(%) | Bond Spreads(Bps) |
|---|---|---|---|---|
|
1
| Ukraine | -59.9 | -66 | 733 |
|
2
| Argentina | -21.4 | -58 | 735 |
|
3
| Hungary | -18.9 | -58 | 283 |
|
3
| Poland | -35.2 | -53 | 127 |
|
5
| Jamaica | -20.4 | -51 | 439 |
|
6
| Ghana | -28 | -35 | 448 |
|
7
| Russia | -22 | -44 | 144 |
|
8
| Kazakhstan | -26 | -34 | 167 |
|
9
| Bulgaria | -1.5 | -51 | 175 |
|
10
| Mexico | -22.6 | -35 | 73 |
| * The difference between a country's bond interest rate and the interest rate on the U.S. treasury bond. The higher the number, the less confidence there is that a country can repay its loan. | ||||
Both rankings were determined by comparing currency devaluations, equity market declines, and rising sovereign bond spreads because these measures tend to track developments in the real economy during times of economic crisis when financial strain handicaps consumption, investment, and in many cases government spending, which limits GDP and employment growth.
Top 10 Least Affected Countries: Sept. 2008–May 2009
| Rank | Country | Currency Depreciation(%) | Equity Market(%) | Bond Spreads(Bps) |
|---|---|---|---|---|
|
1
| China | 0.3 | -11 | -31 |
|
2
| Japan | 9.2 | -17 | -5 |
|
3
| United States | 0 | -24 | 0 |
|
3
| South Africa | 1.5 | -20 | 39 |
|
5
| Peru | -0.4 | -15 | 42 |
|
6
| Philippines | -0.1 | -21 | 53 |
|
7
| Malaysia | -0.9 | -12 | 81 |
|
8
| Germany | -1.2 | -34 | 0 |
|
9
| Colombia | -3.4 | -10 | 63 |
|
10
| France | -1.2 | -34 | 11 |
| * The difference between a country's bond interest rate and the interest rate on the U.S. treasury bond. The higher the number, the less confidence there is that a country can repay its loan. | ||||
The economic crisis has shown that even when a crisis originates in industrialized countries, developing countries pay the highest price and underlines why developing countries have a crucial interest in the financial soundness of large economies like the United States. This helps explain why the G20, rather than the G8, is leading the effort to design a regime to govern international finance. Or that Brazil, Russia, India, and China (the BRICs) organized their first summit to discuss, among other things, the role of the dollar as its reserve currency.
About the Authors
Uri Dadush
Former Senior Associate, International Economics Program
Dadush was a senior associate at the Carnegie Endowment for International Peace. He focuses on trends in the global economy and is currently tracking developments in the eurozone crisis.
Lauren Falcão
Former Junior Fellow, Trade, Equity, and Development Program
Shimelse Ali
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie Endowment for International Peace
- In the Middle East and North Africa, America and China Converge More Than They Diverge
- The Future of American Economic PowerPaper
The future of American economic power will be determined by the interplay between Trump’s ambitions and the global backlash against them, as well as economic developments outside the direct control of the government, such as advances in AI.
Peter Harrell
- From Trade Dependence to Geopolitical Leverage: The EU in an Era of Weaponized InterdependencePaper
As geopolitical rivalry weaponizes global supply chains, the EU’s true vulnerability lies in emerging-risk imports. For these goods, suppliers are growing more concentrated, substitution more difficult, and political risk is looming.
Sinan Ülgen
- Next Steps Toward Peace After the Armenian ElectionsCommentary
It’s time to build momentum, and Ankara is the venue of the next opportune diplomatic window to do this.
Alper Coşkun, Garo Paylan
- European Security Strategy: In Search of a New AmbitionCommentary
The EU is putting together a new security strategy to meet today’s myriad challenges. But for any proposal to be effective, the union needs to grapple with its identity and ambitions.
Pierre Vimont
