Chapter 2 Country and Regional Perspectives
- International Monetary Fund. Research Dept.
- Published Date:
- April 2009
This chapter discusses how the global crisis is affecting the various regions of the global economy. The United States is at the epicenter of the crisis, and is in the midst of a severe recession that has resulted from a squeeze on credit, sharp falls in housing and equity prices, and high uncertainty. These three shocks are to varying degrees also affecting the rest of the world. Asia had little exposure to U.S. mortgage-related assets but is being badly affected by the slump in global trade, given its heavy dependence on manufacturing exports. In Europe, as in the United States, the financial system has been dealt a heavy blow, housing corrections are intensifying, and industrial production is being hit by the sharp drop in durables demand. Because of their heavy reliance on capital inflows to sustain income growth in order to catch up to Western levels, both the emerging European and Commonwealth of Independent States (CIS) economies are suffering heavily, with the slump in commodity prices adding to the pain in many CIS economies. In Latin America and the Caribbean, the fallout from the crisis is moving through both trade and financial channels, intensified by the drop in commodity prices. The Middle Eastern economies are suffering mainly because of the decline in energy prices, and hard-won gains in African economies are threatened by slumping commodity prices and potentially lower aid inflows.