1980s 431980s 43 1990s 661990s 66

Incidence of Banking CrisesIncidence of Banking Crises

Banking Crises Since 1974Banking Crises Since 1974

0

5

10

15

20

25

30

35

40

45

5019

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

98

Cris

is C

ount

ries

Industrial

Developing

Transition

Europe & Central Asia

M. East & N. Africa

Latin America

Asia

Africa

Costs of Banking CrisesCosts of Banking Crises

0

5

10

15

20

25

30

35

40

45

50

Indonesia1997-

ongoing

Chile 1982-85

Macedonia 1993-94

Cote d'Ivoire 1988-91

Mexico1995-

ongoing

U.S. 1989-91

Per

cent

age

Resolution costs of a banking crisis could be as high as 50 percent of

GDP

-15

-10

-5

0

5

10

1997 1998 1999 2000

Pe

rce

nta

ge

of

GD

P

Thailand

Indonesia

Malaysia

Philippines

China

India

China and India Rode the CrisisChina and India Rode the Crisis

GDP Loss during CrisesGDP Loss during Crises

-15

-10

-5

0

5

10

15

1994

1995

1996

1998

1995

1996

1998 1998 1998

1929

1933

Per

cent

age

n/a

Stock Market During CrisesStock Market During Crises

-25

-20

-15

-10

-5

0

5

10

One Year of CrisisP

erce

nta

ge

Ch

ang

e

United States

Korea

Malaysia

Growth in Developing CountriesGrowth in Developing Countries

0

1

2

3

4

5

6

1981-90 1991-97 1998*

* - Projected, 1998/99 Global Economic Prospects. Excludes transition economies.

Per

cent

age

Slowdown in World GrowthSlowdown in World Growth

0

0.5

1

1.5

2

2.5

3

3.5

4

1996 1997 1998 1999

World GDP Grow th

4900

4950

5000

5050

5100

5150

5200

5250

5300

5350

1995 1996 1997 1998* 1999*

World GDP per capita

$U

S

East Asian Exchange RatesEast Asian Exchange Rates$US/Foreign Currency$US/Foreign Currency

-160-140-120-100-80-60-40-20

0204060

1997 1998 1999

Indonesia

Korea

Thailand Malaysia

Per

cent

age

GDP Growth in Crisis Countries*GDP Growth in Crisis Countries*

0

100

200

300

400

500

600

1990 1991 1992 1993 1994 1995 1996 1997 1998**

Korea

Indonesia

Malaysia

Thailand

$U

S b

illio

ns

* Dotted line represents projected GDP growth based on average 1990-96 growth trends.

Source: Statistical Information and Management Analysis database

15%

16%

15%

27%

Real Wages during CrisesReal Wages during Crises

-60

-50

-40

-30

-20

-10

0

10

20

Kor

ea

Thai

land

Indo

nesi

a **

Uni

ted

Stat

es**

Per

cent

age

Cha

nge

** Pre-crisis real wage growth rates are not available for Indonesia and U.S. Source: Bloomberg, Datastream, and World Bank Data Group

1929-1933

Crisis Unemployment RatesCrisis Unemployment Rates

0

1

2

3

4

5

6

7

8

Mexico Korea Thailand

Pe

rce

nta

ge

1994

1995

1996

1998

1998

1997

Causes and BlameCauses and Blame(…enough to go around…)(…enough to go around…)

• Mahatir - Speculative Hedge Funds• Suharto - Misguided Policy Interventions and

exaggerated claims of government malfeasance• Others - Crony capitalism, lack of transparency,

faulty banking systems, inadequate regulatory environment

Element of Truth in All of The AboveElement of Truth in All of The Above

Impact is Felt in Four Major AreasImpact is Felt in Four Major Areas

• Fall in the Demand for Labour

• Decrease in Real Wages

• Reduction in Public Spending Because of Revenue Falls

• Social and Political Upheaval