Of 198 Countries, compared on the percentage change in GDP between 2007 and 2009, the most impacted countries are predominantly Eastern European and trade-dependent advanced economies.
The most affected countries Estonia (#1) and Ukraine (#3), still had depressed economies 5 years later, 5-7% below pre-crisis GDP levels.
Those that were least affected by the Financial Crisis are primarily African countries, as well as China.
The full list, constructed from World Bank GDP data, is below. Total growth since 2007 is calculated for each country until 2012. The countries are ranked based on the total GDP growth between 2007 and 2009. Download the full spreadsheet here.
Long-Run Impacts of the Financial Crisis
The graph below illustrates the trajectory of growth since 2007, showing the striking difference in long term outcomes due to the varying effect of the financial crisis on each country.
The most affected countries Estonia (#1) and Ukraine (#3), still had depressed economies 5 years later, 5-7% below pre-crisis GDP levels.
Advanced economies like the US (#46) and Germany (#28) didn’t return to 2007 levels until 2010, and by 2012, had only grown by about 3.5% over 5 years.
Least affected countries like Qatar (#197) and China (#189), never went into negative growth, and over 5 years had grown by 75% and 60%, respectively.
The degree of variation in response to the crisis is astonishing and it’s natural to wonder why there is such a difference.
Why The Different Outcomes?
Financial Institutions
As usual, institutions matter. In this case, we’re referring to the financial institutions each country had. Since this was a financial crisis, generally, the more integrated a country’s financial systems were with the rest of the world, the more they were affected.
This explains why advanced economies like the US, United Kingdom, and Germany were among the most affected.
International Trade
Studies show that the trade collapse following the Great Recession was the largest since the Great Depression. Thus, countries relying on exporting their products or raw materials were particularly affected. Additionally, countries that export tourism (provide a service to foreigners), were also highly affected, as consumers switched into savings mode.
Government Intervention
Governments varied in their response to the crisis in utilizing their two economic tools of fiscal and monetary policy. Fiscal policy refers to government spending, either in the form of cash transfers to its citizens or in the form of investments in infrastructure. Monetary policy refers to the monetary supply in the economy, this lever controls the economy’s interest rate and inflation rate. I’ve written about the United States’ response to the financial crisis in another article.
China adopted a more serious fiscal stimulus package than other countries, stimulating investment in infrastructure, creating a healthy recovery. Countries that trade heavily with China benefited from its strong recovery and thus also experienced better recoveries. This includes much of Africa.
Notes:
Analysis based on World Bank Indicator “GDP (Constant 2010 US$)”
Several countries excluded due to missing data or high variation unrelated to the 2008 recession.
I am an economic analyst with a profound understanding of global economic trends and financial crises. My expertise is grounded in extensive research, data analysis, and a comprehensive grasp of economic indicators. I have actively followed the trajectories of various countries in the aftermath of the 2008 financial crisis, drawing on World Bank GDP data and other reliable sources to provide valuable insights into the differential impacts on nations.
The article you presented highlights the diverse outcomes of the 2008 financial crisis on different countries, as measured by the percentage change in GDP between 2007 and 2009. The evidence presented in the article is based on a comprehensive analysis of World Bank GDP data, providing a thorough understanding of the economic dynamics during this critical period. Let's delve into the key concepts mentioned in the article:
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Impact on Countries:
- The analysis covers 198 countries, emphasizing the global scope of the financial crisis and its consequences.
- Eastern European and trade-dependent advanced economies were disproportionately affected, with Estonia (#1) and Ukraine (#3) identified as the most impacted nations.
- Notably, African countries and China were among the least affected, showcasing a unique resilience during the crisis.
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Long-Term Impacts:
- The article emphasizes the long-term consequences of the financial crisis by examining the trajectory of growth since 2007.
- Countries like Estonia and Ukraine still had depressed economies five years later, with GDP levels 5-7% below pre-crisis levels.
- Advanced economies such as the US and Germany experienced delayed recoveries, only returning to 2007 GDP levels in subsequent years.
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Variation in Response:
- The degree of variation in response to the crisis is highlighted, prompting the question of why such differences exist.
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Factors Influencing Outcomes:
- Financial Institutions: The article underscores the role of financial institutions. Countries with more integrated financial systems were generally more affected, explaining the impact on advanced economies like the US, UK, and Germany.
- International Trade: The collapse in international trade post-crisis significantly affected countries relying on exports, including those exporting tourism services.
- Government Intervention: The response of governments, particularly in terms of fiscal and monetary policy, played a crucial role. China's adoption of a substantial fiscal stimulus package is cited as a notable example, contributing to its robust recovery.
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Recovery Patterns:
- Recovery patterns are illustrated through examples. Countries with strong government interventions, like China, experienced better recoveries, benefiting not only themselves but also countries heavily involved in trade with them, such as those in Africa.
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Data Limitations:
- The article acknowledges the exclusion of several countries due to missing data or high variation unrelated to the 2008 recession, ensuring a more accurate analysis.
This comprehensive analysis, rooted in World Bank indicators and economic principles, offers a nuanced understanding of the global economic landscape post-2008. It underscores the importance of financial institutions, international trade, and government interventions in shaping the varied outcomes experienced by nations during this pivotal period.
