Download Document

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project

Document related concepts

International monetary systems wikipedia, lookup

Remittance wikipedia, lookup

Gifting remittances wikipedia, lookup

Transcript
The Financial Crisis and its Impact
on the Services sector
Deepali Fernandes
Second National Services Assesment Workshop
Kathmandu, 27th-28th October 2009
Division on International Trade in Goods, and Services and
Commodities
UNCTAD
UNCTAD/CD-TFT
1
Outline
• the global economic crisis and trade
• impact of crisis on services
• impact of crisis on
• Tourism
• IT and software services
• Migration
• policy responses
UNCTAD/CD-TFT
2
The global economic crisis
• global recession first time in 70 years
• financial crisis  macroeconomic crisis
• falling trade, production and consumption, major
markets:
• overall world output to decline by 1.3% in 2009
• IMF predicts negative GDP growth for ICs of 3.8% (2009)
• impact varies across countries and sectors
• firms faced with tighter credit conditions and weaker
demand  laying off and non creation of new jobs
UNCTAD/CD-TFT
3
global economic crisis: how have
developing countries been impacted?
• contracting demand transmitted recession to
developing countries
retraction of world trade, cross border capital
flows, unemployment, fall in remittances,
reduction in labour mobility
• GDP growth predicted to decline
• Africa  from 5.2 to 2%, Latin America and the
Caribbeanfrom 4.2 to -1.5%, Developing Asia
from 7.7 to 4.8%
• low income countries with a high dependence on few
commodities, services or remittances most hard hit
UNCTAD/CD-TFT
4
global economic crisis: how have
developing countries been impacted?
• private capital flows fallen, UNCTAD estimates:
• global FDI inflows fell 54% in 1st, quarter of 2009
• FDI inflows to developing countries in 2008 
USD 549 billion, 2009 expected to fall by 25%
• reversal in poverty reduction targets
• number of poor living on less than 2 dollars a
day could rise by 40 million, those living on 2
dollars a day by more than 100 million
• economic recovery expected in late 2009 or 2010,
however
• recovery in developing countries, likely to face a
longer time lag
UNCTAD/CD-TFT
5
Nepal and the crisis
• so far Nepal more insulated
• good macroeconomic management, non
integrated financial markets
• however, indirect impact likely through trade
• i.e export earnings, external financing for
infrastrucuture
• contraction of merchandise exports
• links to India, China
• risk of negative spill over from slowdown in
economies in terms of investment, tourism
UNCTAD/CD-TFT
6
Nepal and the crisis
• recovering from inflationary impacts of food and energy
crisis (2008)
• Nepal can benefit from lower commodity prices - oil
• current impact on migrant workers
• remittances, reabsorbtion
• services sector expected to offset other sectors given
limited impact of crisis on  remittances and tourism
• economy expected to recover in 2010
• Asia expected to lead this recovery
UNCTAD/CD-TFT
7
Nepal and the crisis
UNCTAD/CD-TFT
8
What has been the impact on
Services sectors?
• fall in discretionary spending by households
• declining household wealth, tight credit conditions
• limited decline in demand for necessary services
• e.g. health, water, energy, education,
telecommunications, business and professional
• contraction of demand for income sensitive services
• e.g tourism, transport, construction
• decline in consumer goods sector  distribution services
and employment in supply chains
UNCTAD/CD-TFT
9
Services- varying sectoral impact
• impacts vary across sectors
• most pronounced in financial, distribution,
construction, manufacturing, automobile, tourism
• impacts vary across countries
• heavy impact on SMEs
• banks not lending, SMEs end of payment chain
• Nepal services sector charachterized by SMEs
• impact on balance of payments situation
• financing gap expected in 2009
• Gap could worsen with expected decline in
remittances, FDI and official aid
UNCTAD/CD-TFT
10
Services- construction, tourism
• construction services every region to fall in spending
• globally, construction market to shrink to USD 5.6
trillion in 2009
• GCC countries  (2008) decline of 80% in value of
new construction contracts
• Tourism demand contraction of 3% in 2009
• 5 million job cuts in 2009
• UNWTO figures indicate
• (late 2008) intl tourist arrivals flatttened in ICs
• Nepal remains attractive tourist destination
• Tourism receipts seem stable for the moment
UNCTAD/CD-TFT
11
Services : IT and software
• DCs incl. Nepal, benefit from a low-wage skilled labor
force
• 2009, global IT spending expected to decline by 4.7 %
• largest dip in IT budgets, likely in professional, telecom,
technology at 10 %, manufacturing at 8 %, utilities and
financial services - 4 %
• However longer term perspective, resillience and recovery
• NASSCOM estimates crisis impact in 2009 with,
rebound from 2010 onwards
• industry faced with dual challenge
• protectionist tendencies versus cost cutting benefits
• reverse outward investment by IT companies to EU/US
• resulting in flow of capital, job creation
UNCTAD/CD-TFT
12
What is the Impact on employment
and migration?
• global unemployment expected to rise
• from 5.7% (2007) to between 6.5-7.4% (2009)
• number of unemployed expected to increase by
• between 30-59 million workers compared to 2007 pre
crisis levels
• 11-17 million in ICs, 19-42 million in DCs
• bad econ. conditions  unemployment  migration
• more restrictive policies for labour movement
• labour migration flows fall globally
• Less remittances
UNCTAD/CD-TFT
13
Impact on Migration
• crisis most pronounced in migrant employing sectors
• falling employment results in fall in migration
• UN DESA  annual growth rate of global nonrefugee migrant lower in 2005-2010 than 20002005, UK  45% reduction in migrants from
Eastern Europe
• possible bankruptcy of migrants  poverty
implications
• introduction of restrictive policy responses
• financial incentives – Spain, Japan, UK
• close-off entry of new migrants – Korea, US
UNCTAD/CD-TFT
14
Impact on Migration: remittances
• remittances usually more resilient to economic
downturn than aid and investment flows
• drop in remittances possible due to a reduction of
jobs in many services sectors industries
• remittance flows to developing countries USD 328
billion (2008)
• Represents over half the value of FDI inflows
($550 b) and more than twice ODI ($119 b)
• expected to fall sharply for developing countries in
2009 by 7.3%
UNCTAD/CD-TFT
15
Migration and Nepal
• migration key contributing sector
• ADB: remittances account for 20% of GDP
• Nepal (2007) earned nearly Rs 100 billion from
remittances
• Major destinations: India, Middle East, Southeast Asia
• during the crisis
• remittances remain resilient, supporting domestic
consumption and current account
• remittance growth slowed
• with decline of capital  role of remittances as a“crisis
smoothener”
UNCTAD/CD-TFT
16
Policy responses
• need for a global response for
• fulfilling pledges for development
assistance, maintaining aid flows,
supporting social safety nets, labour
intenstive infrastructure, SMEs and AfT
• address issue of financing gaps for DCs
• in 2010 likely to be between USD 200-700
billion
UNCTAD/CD-TFT
17
Policy responses
• diffrentiated sectoral policy responses
• some may require reduction in number of workers,
others addressing condition of employment
• resist pressure for trade protection
• renewed commitment to the Doha round,
multilateral monitoring of trade related measures
and policies being undertaken
• reform of national and international
regulation of financial markets
UNCTAD/CD-TFT
18
Policy responses
• IT sector and tourism sector
• good time to take stock
• build on south-south and regional trends i.e India,
China, Gulf focus
• optimal use of available financing including G-20,
Aid for Trade
• Migration
• re-integration of returnees, scaling up of skills
• bilateral discussions and policies
UNCTAD/CD-TFT
19
Thank you for your attention!
[email protected]
UNCTAD/CD-TFT
20