Global Financial Crisis and the Challenges for Developing Countries
The Challenges
Global financial crisis is known to generally hit the developed economies and cause a slowdown in the economy and even negative growth. This is primarily due to the slack demand in the local market and he surrounding markets. For the developing countries the impact of a global financial meltdown is directly related to the importance of exports and the dependence on capital inflow of foreign funds for local industries and to the economy.
The Challenges
For example in the countries of South Asian countries, for example more than 22% of the Gross Domestic Products is formed by exports of goods and services. The percentages of such exports of the GDP is 26% in the Latin America and the Caribbean countries, 35% in sub-Saharan Africa, 40% in central Asia while it is nearly half of the GDP in countries of East Asia (de Paiva Abreu et al., n.d.).
For the developing countries with relatively bigger economies like Brazil, India, China, Indonesia and Mexico have exports to the tune of 15%, 23%, 40%, 31% and 32% respectively (de Paiva Abreu et al., n.d.).
Most of these exports from the developing economies go to the developed economies Therefore a slowdown in demand in the developed nations would directly affect the economies of the developing countries. In However in the globalized economy, export is one of major backbones of the developing economies and the underdeveloped economies have become developed primarily due to the rise in creation and exports of goods (World Bank, 2008). A decline in exports therefore also depletes the developing economies of critical foreign reserves that the countries often use for the procurement of vital commodities like oil and food grains.
The developing countries that had depended on the export of primary commodities...
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