Review of ADB s Lending Instruments for Crisis Response

Transcription

1 Policy Paper June 2016 Review of ADB s Lending Instruments for Crisis Response Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB's Public Communications Policy 2011.

2 ABBREVIATIONS ADB Asian Development Bank BOP balance of payments CSF Countercyclical Support Facility DMC GDP developing member country gross domestic product IMF International Monetary Fund LIBOR London interbank offered rate OCR ordinary capital resources PBL policy-based lending PFO precautionary financing option NOTE In this report, "$" refers to US dollars. Managing Director General Director General Director Team leader Team members Juan Miranda, Managing Director General, Office of the President I. Bhushan, Director General, Strategy and Policy Department (SPD) V. Reppelin-Hill, Director, Strategy, Policy, and Interagency Relations Division, SPD K. Takamiya, Principal Planning and Policy Economist, SPD C.O.C. Mercado, Strategy and Policy Officer, SPD E.G. Fulgentes, Strategy and Policy Assistant, SPD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 CONTENTS Page I. INTRODUCTION 1 II. EVOLUTION OF ADB S CRISIS TOOL KIT 1 III. A. Asian Financial Crisis and Special Policy-Based Lending 1 B. Global Financial Crisis and Countercyclical Support Facility 2 RECENT TURMOIL AND PROPOSED REFINEMENT TO COUNTERCYCLICAL SUPPORT FACILITY 3 A. Coping with Broader Exogenous Shocks 3 B. Refining the Countercyclical Support Facility 3 IV. RELATIONSHIP WITH CONVENTIONAL POLICY-BASED LENDING 5 V. COOPERATION WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS 6 VI. RECOMMENDATION 6 APPENDIXES 1. A Short History of the Countercyclical Support Facility 7 2. Growth Rates of Developing Member Countries Eligible for Nonconcessional Lending 9 3. State of Economies of Countercyclical Support Facility Borrowers 10

4 I. INTRODUCTION 1. The Asian Development Bank (ADB) introduced program lending in the aftermath of the global oil crisis in the 1970s. 1 ADB has been fine-tuning its lending tool kit since then, building on lessons learned from major crises. It has increasingly been recognized that conventional policy-based lending (PBL) with structural reform conditionality is best suited to support reforms under normal circumstances, but not necessarily in times of crisis. New instruments have been established to address unique crisis situations. These include special PBL, 2 which was introduced after the Asian currency crisis in 1997, and the Countercyclical Support Facility (CSF), which was established as a time-bound instrument during the global financial crisis in and mainstreamed in Recent developments affecting emerging market economies, such as the collapse of global commodity prices and the economic slowdown of major trading partners, were reminders that exogenous shocks can disrupt developing countries. Each crisis is different, and ADB must continually review and refine its tool kit to provide the most effective support to its developing member countries (DMCs). This paper presents an overview of the evolution of ADB s crisis response instruments and identifies the need for further refinement of the CSF. II. EVOLUTION OF ADB S CRISIS TOOL KIT A. Asian Financial Crisis and Special Policy-Based Lending 3. Emerging market economies went through various economic crises in the 1980s and 1990s. The largest was the Asian financial crisis that began in In partnership with other international financial institutions, ADB helped DMCs respond to the crisis. It was triggered by a currency devaluation in Thailand, which led to speculative attacks in the face of the large current account deficit (equivalent to 8.1% of gross domestic product in the year before the crisis), and spread to some other countries in East Asia. The collapse of exchange rates brought about an expansion of debt denominated in foreign currencies, which turned the currency crisis into a financial crisis and then an economic crisis that undermined growth. 4. Among international financial institutions, the International Monetary Fund (IMF) has a specific mandate of providing financial support when requested by its members faced with a balance-of-payment (BOP) problem. 5 Because the Asian financial crisis occurred in the context of unsustainable external accounts, the IMF led the response, supported by ADB and the World Bank. Based on this experience, ADB introduced the special PBL instrument to provide largescale financing to emerging market economies, as part of its review of the program lending policy in The original terms of special PBL comprised a floor interest rate of 400 basis points over the London interbank offered rate (LIBOR) and 5-year maturity, including a 3-year grace period. Access was limited to DMCs eligible to borrow from ADB s ordinary capital resources (OCR), and charges applicable to regular OCR loans, such as commitment charges, 1 ADB Program Lending. Manila. 2 ADB Review of ADB s Program Lending Policies. Manila. 3 ADB Enhancing ADB s Response to the Global Economic Crisis Establishing the Countercyclical Support Facility. Manila. 4 ADB Review of ADB s Policy-Based Lending. Manila. 5 IMF s intervention is not limited to BOP crises. During the turmoil experienced by several European Monetary Union countries, IMF has provided direct budget support. 6 ADB Review of ADB s Program Lending Policies. Manila.

5 2 were to apply. The addition of special PBL to ADB s tool kit formalized ADB s participation in the collaboration arrangement led by the IMF to address the BOP crises. 5. While ADB provided lending to the Republic of Korea as part of the IMF-led international rescue package in 1997, it was a special arrangement, and special PBL has not been used since its introduction in Under ADB s PBL policy review in 2011, the special PBL s minimum spread was reduced to 200 basis points for harmonization with a similar instrument of the World Bank (special development policy lending), and flexibility was enhanced by allowing for an extended maturity of up to 8 years. B. Global Financial Crisis and Countercyclical Support Facility 1. Establishment of the Countercyclical Support Facility 6. The global financial crisis during triggered strong international calls for fiscal stimulus. The Group of Twenty urged multilateral development banks to provide countercyclical lending within their risk-bearing capacity to complement insufficient IMF resources. In 2009, ADB established the CSF as a new instrument to help OCR-eligible DMCs address the adverse impact of the global economic crisis and support specific countercyclical development expenditures/policy program as a time-bound instrument for (footnote 3). The facility was designed to provide incremental support on top of regular development financing and avoid crowding out any planned support. The lending terms of the original facility comprised interest rates set at 200 basis points over LIBOR, a rebate or surcharge reflecting the cost of funds, 5-year maturity including a 3-year grace period, and a commitment charge of 75 basis points per year on the undisbursed loan balance. While the CSF is exempted from ADB s program lending ceiling, each loan to a country was capped at $500 million to avoid breaching ADB s risk-bearing capacity and to maintain accessibility for a wide range of crisis-affected DMCs. 7. The 2009 CSF had three main access criteria: (i) adverse impacts of the global economic crisis, (ii) planned countercyclical development expenditure for poverty reduction, and (iii) sound macroeconomic management. The original CSF was used to lend to Bangladesh, Indonesia, Kazakhstan, the Philippines, and Viet Nam in 2009, as a complement to other multilateral support to countries affected by the global financial crisis. Appendix 1 provides a short history of the CSF. 2. Mainstreaming the Countercyclical Support Facility 8. In 2011, in the aftermath of the global financial crisis, ADB mainstreamed the CSF as a permanent instrument as part of a broader PBL policy review. The updated policy formally acknowledged 7 the precautionary financing option (PFO), which allowed approval of a CSF loan in anticipation of an adverse event with disbursements withheld until the impacts of the crisis are felt by the borrowing DMC. The mainstreamed CSF retained the terms of the original CSF, with additional flexibility to set a longer maturity of up to 8 years. This was partly based on the recommendation of a real-time evaluation of ADB s crisis response by the Independent Evaluation Department. 8 A CSF loan was processed for Indonesia on a precautionary basis in 2012 and for Kazakhstan in 2015 (Appendix 1). 7 Footnote 4. Para. 32 of the policy paper acknowledges the PFO as a mode of disbursement for the CSF. 8 Independent Evaluation Department Special Evaluation Study: Real-Time Evaluation of Asian Development Bank s Response to the Global Economic Crisis of Manila: ADB.

6 3 III. RECENT TURMOIL AND PROPOSED REFINEMENT TO COUNTERCYCLICAL SUPPORT FACILITY A. Coping with Broader Exogenous Shocks 9. Recent experience has confirmed that a major financial crisis originating abroad is not the only exogenous shock that could disrupt the growth prospects of DMCs in Asia and the Pacific. Other disruptive factors observed have included (i) sharp swings in global commodity prices, (ii) changes in monetary policy of reserve currency countries, (iii) a significant slowdown in economies of major trading partners, and (iv) a spillover of geopolitical events. For instance, the collapse of oil prices and the recession in the Russian Federation s economy led to a sharp slowdown of economies in the Caucasus and Central Asia. 9 For these countries, the adverse impacts of such exogenous shocks have been as severe as those of the global financial crisis during This highlights the need for a countercyclical fiscal response. Some DMCs in other subregions are also experiencing downturns, albeit to different degrees. Appendix 2 presents the growth rates of nonconcessional assistance countries. 10. Because these broader exogenous shocks can disrupt growth, mitigating such adverse impacts is in line with ADB s institutional mandate. If such shocks lead to a serious BOP crisis requiring IMF s intervention, ADB should mobilize special PBL under IMF s leadership. However, when such impacts are limited primarily to slower growth, the CSF would be the right instrument. This instrument has been used without IMF involvement to date. However, when the IMF leads a crisis response, the CSF should support such an IMF-led package. ADB support through the CSF ensures that pro-poor fiscal measures are preserved and possibly expanded in spite of the crisis. 11. In most cases, however, structural issues in countries exacerbate crises, even when triggered by exogenous shocks. ADB assistance through conventional PBL is needed in such cases to support structural reforms. The CSF is the appropriate instrument to mitigate the adverse short-term impact of a crisis, while the conventional PBL is appropriate for addressing structural issues with the goal of preventing a recurrence of such downturns. B. Refining the Countercyclical Support Facility 12. During the Board discussion of the second CSF loan to Kazakhstan on 21 August 2015, it was suggested that the CSF access criteria be elaborated and clarified. The access criteria for the original CSF reflected the unique context of the global economic crisis. Those criteria need to be refined for the current context. 13. Access criteria. CSF is an exceptional instrument reserved for addressing severe crises. In most cases, the use of conventional PBL should be considered as a default form of ADB budget support. A DMC will be eligible to receive CSF assistance only when the following conditions are met: (i) Adverse impact of exogenous shocks. The DMC has experienced, or is likely to experience, a severe decline in growth. 10 While it is difficult to specify a strict threshold for this decline, the experience of those earlier crises may be The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, Board of Directors, Management, or staff, and may be preliminary in nature. 9 IMF The Spillover Effects of Russia s Economic Slowdown on Neighboring Countries. Washington, DC. 10 In addition to data from relevant national authorities and ADB data and publications, such as the Asian Development Outlook, its Update, and Supplement, macroeconomic analysis should be sourced from IMF s staff report on Article IV consultation and other IMF reports.

7 4 referenced as a guide to determine eligibility for CSF operations. (Appendix 3 provides a snapshot of the state of five economies that borrowed from CSF.) While a severe decline in growth would be the main criterion for the CSF, the following additional indicators tailored to specific country contexts could also be part of the justification. The DMC may be facing, or is likely to face, substantial fiscal stress, such as actual or projected fiscal deficit and lower revenue collections. For DMCs relying on international capital markets to finance public expenditures, a rise in the spread on government bonds could disrupt their access at favorable terms.11 For DMCs relying on exports and/or remittances, exogenous factors can cause a sharp decline in those inflows. (ii) (iii) (iv) (v) (vi) Countercyclical development expenditures. The government has an effective countercyclical development expenditure/policy program to be supported by the CSF, and is committed to its implementation. The program includes social safety nets targeting the poor or vulnerable groups. Pre-shock record of generally sound macroeconomic management. Monetary policy addresses price stability as one of its core objectives, and inflation is controlled. Public finances are sound, as shown by recent fiscal balances in relation to the economy s cyclical position, the quality of any adjustment measures being planned, and an overall sound institutional budgetary framework. Structural reforms. Where structural weaknesses substantially increase vulnerability to exogenous shocks, there need to be assurances that the country is taking credible steps to address the underlying structural issues. To enhance the effectiveness of such reforms, the country may engage with ADB to negotiate conventional PBL to address these weaknesses (paras 17 18). Debt sustainability. The borrower s debt sustainability, including potential impacts of the prospective CSF assistance, is confirmed. International reserves are determined to be adequate, taking into account the imports coverage ratio and the short-term external debt financing requirement. Relevant indicators may be based on the debt sustainability analysis by the IMF and the World Bank, or a similar assessment when such a joint analysis is not conducted. Coordination with International Monetary Fund. If the IMF is not involved in crisis response, ADB will ensure that the country has had constructive consultations with the IMF, such as recently completed or ongoing Article IV consultations. ADB should secure an assessment letter from the IMF confirming the soundness of the government s macroeconomic management and other policies before the Board of Directors considers the proposed assistance. ADB should work closely with its counterparts at the IMF to determine that the CSF and the related PBL would be appropriate, despite the absence of an IMF program. 14. An assessment of the access criteria will likely involve a degree of judgment, and flexibility might be needed (footnote 3). The assessment will need to take into account the diversity in DMCs' circumstances and the uncertainties underpinning economic projections. 11 Alternatively, the credit default swap spread could be referenced.

8 5 15. Financing and operational features. The financing and operational features of the mainstreamed 2011 CSF remain largely unchanged, except that the consultation process with the Board is strengthened. The key financing and operational features of the refined CSF are elaborated as follows: (i) (ii) (iii) (iv) (v) Terms. The lending terms for CSF loans will comprise interest rates set at a minimum spread of 200 basis points over LIBOR, a rebate or surcharge reflecting the cost of funds, maturity of 5 8 years including a grace period of up to 3 years, and a commitment charge of 75 basis points per year on the undisbursed loan balance. The report and recommendation of the President should specify the likely loan disbursement date. Precautionary financing option. Disbursement may be immediate or deferred under certain conditions, such as a deterioration of market conditions. The PFO may be exercised when it is highly likely that the impacts of the exogenous shock will reach the recipient country but have not fully materialized at the time of ADB s financing commitment. The conditions for drawing down should be articulated in the report and recommendation of the President of individual CSF operations. Business processes. Streamlined business processes similar to those applicable for the 2004 Disaster and Emergency Assistance Policy 12 will apply. ADB s assessment will include the appropriateness of the countercyclical development expenditures and will identify its value addition. Early information will be provided to the Board when a DMC has requested CSF lending. An informal Board seminar should be conducted as soon as Management receives sufficient information. The rationale for mobilizing the CSF, especially the existence of economic stress, should be clearly presented in the informal Board seminar. Eligibility. OCR-eligible DMCs under the 2008 Review of the 1998 Graduation Policy, 13 as amended from time to time, have access to CSF lending. Ceiling. Total lending to each country under the CSF is capped at $500 million per exogenous shock or crisis episode. CSF loans will not be counted towards ADB s PBL ceiling, but will be managed within ADB s risk-bearing capacity. 16. All other financing and operational features applicable to conventional PBL, including the 2011 Review of ADB s Policy-Based Lending, 14 as amended from time to time, will be observed. IV. RELATIONSHIP WITH CONVENTIONAL POLICY-BASED LENDING 17. As envisaged in the original 2009 policy and the 2011 mainstreaming, CSF operations should focus on short-term fiscal responses in principle. Where structural weaknesses substantially increase vulnerability to an external shock, CSF operations might be accompanied The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, Board of Directors, Management, or staff, and may be preliminary in nature. 12 ADB Disaster and Emergency Assistance Policy. Manila. 13 ADB Review of the 1998 Graduation Policy of the Asian Development Bank. Manila. Asian Development Fund (ADF)-only countries do not have access to CSF lending. ADB is exploring options to address crisis response in these DMCs. 14 ADB Review of ADB s Policy-Based Lending. Manila.

9 6 by, and integrated with, complementary PBL operations addressing the underlying structural issues connected with the crisis. 18. In such cases of structural weaknesses, during loan negotiations, the requesting country must commit to a robust structural reform program to be defined within a short-time frame. 15 The paper seeking the Board approval of CSF support should include the mechanism for monitoring and reporting of such a reform program. V. COOPERATION WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS 19. Consultation with the IMF and other international financial institutions is important for the CSF, beyond securing the IMF assessment letter especially when the IMF is not involved in the crisis response. ADB should continue to involve IMF staff through regular and active policy dialogue during preparation of the CSF operation. ADB should routinely attend the Article IV consultations or other IMF missions. Similar engagement with other international financial institutions should also be adopted as needed. VI. RECOMMENDATION 20. The President recommends that the Board approve the refined Countercyclical Support Facility, as described in paras above. 15 For instance, DMCs suffering from a collapse of international commodity prices may wish to advance reforms for diversification of the economy to reduce dependency on commodity exports.

10 Appendix 1 7 A SHORT HISTORY OF THE COUNTERCYCLICAL SUPPORT FACILITY A. Original Countercyclical Support Facility Established Amid Global Financial Crisis 1. In response to the global financial crisis, the Board of Directors of the Asian Development Bank (ADB) approved the Countercyclical Support Facility (CSF) in At the time, the collapse of global trade and adverse developments in the sovereign bond market were severely constraining emerging market economies. When the Group of Twenty called for countercyclical support by multilateral development banks, ADB established the CSF as its flagship initiative to counter the crisis in Asia and the Pacific. 2. The CSF was a clear departure from the crisis response instruments of other international financial institutions because it required fiscal stimulus (rather than austerity) at the macroeconomic level without necessarily imposing structural reform conditionality at the microeconomic level. Partly derived from the lessons learned during the 1997 Asian financial crisis, 2 this design feature was a reflection that (i) expansionary macroeconomic policy is required once a crisis leads to an economic downturn, and (ii) structural reforms aimed at medium-term efficiency gains at the microeconomic level have little immediate relevance in making up for the loss of aggregate demand The original CSF was established during the global financial crisis of as a time-bound instrument to assist developing member countries (DMCs) eligible to borrow from ordinary capital resources. The CSF was to provide up to $3 billion in total crisis support with the ceiling for each country set at $500 million. It had three access criteria: (i) adverse impacts of the global economic crisis; (ii) a countercyclical expenditure program in place; and (iii) sound macroeconomic management, with further elaboration for each criterion. In addition to ADB s confirmation of a DMC s debt sustainability, other binding policy requirements were conclusion of Article IV consultations within the past 18 months and an assessment letter by the International Monetary Fund. The lending terms comprised interest rates set at 200 basis points over the London interbank offered rate (LIBOR), a rebate or surcharge reflecting the cost of funds, 5-year maturity including a 3-year grace period, 4 and a commitment charge set at 75 basis points per year on the undisbursed loan balance. 4. In 2009, five DMCs (Bangladesh, Indonesia, Kazakhstan, the Philippines, and Viet Nam) each borrowed $500 million from the CSF. The original CSF expired on 31 December 2010, by which time the global financial crisis had been mostly resolved. The DMCs appreciated the CSF initiative, and the World Bank s Independent Evaluation Group recommended that the World Bank follow ADB. 5 1 ADB Enhancing ADB s Response to the Global Economic Crisis Establishing the Countercyclical Support Facility. Manila. 2 M. Feldstein Refocusing the IMF. Foreign Affairs. Vol. 77 (May/April), Issue 2, pp ; J. Stiglitz Globalization and Its Discontents. London: Penguin. 3 However, the policy-based lending (PBL) policy does not preclude the possibility of using structural reform conditionality in addition to the fiscal stimulus. For instance, the public expenditure support program using the conventional PBL modality was processed for Indonesia and Bangladesh during the global financial crisis in CSF s short maturity was meant to mitigate the possible strain on ADB s risk-bearing capacity and crowding out of regular development financing. 5 Independent Evaluation Group The World Bank Group s Response to the Global Economic Crisis: Phase 1. Washington, DC: The World Bank Group.

11 8 Appendix 1 B. Mainstreamed Countercyclical Support Facility under 2011 Policy-Based Lending Policy 5. With the Board s approval of the enhanced policy-based lending (PBL) policy in 2011, the CSF was mainstreamed as ADB s regular crisis response instrument. 6 The CSF mainstreaming was based on a key lesson learned in 2009 that ADB should have a tool in place to be able to act immediately when required because attempting to establish a new lending instrument after the outbreak of a crisis would delay needed support. 7 The mainstreamed CSF retained most of the features of the original CSF except that, reflecting the Independent Evaluation Department s real-time evaluation of ADB s crisis response, 8 flexibility to set the longer maturity (up to 8 years) was added and the precautionary financing option was formally recognized. When the CSF was mainstreamed, the detailed access criteria of the original CSF (referencing the global economic crisis) were not retained in the policy paper to ensure flexibility to cope with unforeseen potential exogenous shocks in the future. However, the original CSF s policy requirements on the International Monetary Fund s Article IV consultation and assessment letter, as well as ADB s confirmation of the DMC s debt sustainability, remained The mainstreamed CSF was first used for a precautionary loan to Indonesia at the time of the eurozone sovereign debt crisis in 2012 ($500 million, with a precautionary financing option). Another CSF loan for immediate disbursement to Kazakhstan was processed in 2015 ($1 billion). Both loans adopted the original CSF lending terms (200 basis points over LIBOR, 5- year term including a 3-year grace period). For the loan to Kazakhstan, the Board granted waiver to exceed the policy s country ceiling ($500 million). Because of this exception and to address Board concerns about Kazakhstan s CSF eligibility, the loan was divided into two $500 million tranches, and a number of policy reforms were designated as conditions for release of the second tranche (i.e., the part of the loan exceeding the CSF country ceiling). 6 ADB Review of ADB s Policy-Based Lending. Manila. 7 ADB has another crisis instrument, special policy-based lensing (SPBL). However, SPBL is mainly aimed at cofinancing IMF s stand-by arrangement at the time of the BOP crisis. 8 ADB Special Evaluation Study: Real-Time Evaluation of Asian Development Bank s Response to the Global Economic Crisis of Manila. 9 Also, support from CSF was deemed possible only within ADB s own risk bearing capacity.

12 Appendix 2 9 GROWTH RATES OF DEVELOPING MEMBER COUNTRIES ELIGIBLE FOR NONCONCESSIONAL LENDING (% per year) Central Asia Armenia (14.2) Azerbaijan Georgia (3.8) Kazakhstan Turkmenistan Uzbekistan East Asia China, People s Republic of Mongolia (1.3) South Asia Bangladesh India Pakistan Sri Lanka Southeast Asia Indonesia Malaysia (1.7) Philippines Thailand (2.3) Viet Nam Pacific Cook Islands (0.1) 0.5 (2.6) 4.1 (1.7) (1.2) (0.5) Fiji (3.0) Micronesia, Federated States of (0.5) (3.6) (3.4) (1.5) Palau (2.1) (1.7) Papua New Guinea Timor-Leste ( ) = negative. Source: ADB Asian Development Outlook 2011: South South Economic Links. Manila; ADB Asian Development Outlook 2016: Asia s Potential Growth. Manila.

13 10 Appendix 3 STATE OF ECONOMIES OF COUNTERCYCLICAL SUPPORT FACILITY BORROWERS Table A3.1: Macroeconomic and Financial Indicators Table A3.1 presents indicators of economies that borrowed from the Countercyclical Support Facility (CSF) for the year preceding the United States subprime crisis (2006, the pre-crisis base year) and the peak years of the global financial crisis (2009), the eurozone crisis (2012), and the recent turmoil (2015), selected because of the CSF access criteria. The CSF was mobilized for all of five countries in 2009, for Indonesia in 2012, and for Kazakhstan in Real GDP Growth (% per year) Bangladesh Indonesia Kazakhstan Philippines Viet Nam Central Government Fiscal Balance (% of GDP) Bangladesh (3.2) (3.9) (3.6) (4.3) Indonesia (0.9) (1.6) (1.8) (2.5) Kazakhstan 0.8 (2.9) (2.8) (2.2) Philippines (1.1) (3.9) (2.3) (0.9) Viet Nam (1.2) (10.6) (4.6) (5.4) General Government Revenues (% of GDP) Bangladesh Indonesia Kazakhstan Philippines Viet Nam Merchandise Export Growth (% per year) Bangladesh Indonesia 19.0 (14.3) (2.0) (15.4) Kazakhstan 37.0 (39.0) 2.0 (42.4) Philippines 15.6 (22.1) 21.2 (13.1) Viet Nam 22.7 (8.9) JP Morgan EMBI Sovereign Spreads (annual average, basis points) Bangladesh n.a n.a. n.a. n.a. Indonesia Kazakhstan Philippines Viet Nam Personal Remittances Received (% of GDP) Bangladesh n.a. Indonesia n.a. Kazakhstan n.a. Philippines n.a. Viet Nam n.a n.a. ( ) = negative, ADB = Asian Development Bank, CSF = Countercyclical Support Facility, EMBI = Emerging Market Bond Index, GDP = gross domestic product, n.a. = not available, US = United States. Note: Pre-crisis EMBI data for Kazakhstan covers July December Data for 2006 is not available. Source: ADB Asian Development Outlook 2011: South South Economic Links. Manila; ADB Asian Development Outlook 2016: Asia's Potential Growth. Manila; Bloomberg LP; and World Bank Open Data (

14 Appendix 3 11 Table A3.2: Crisis Impacts Change from the Pre-Crisis Record (2006) (%) Table A3.2 compares the change of values presented in Table A3.1 between the pre-crisis base year (2006) and the crisis years (2009, 2012, and 2015) with the value of the pre-crisis record. The Countercyclical Support Facility (CSF) was mobilized for all of five countries in 2009, for Indonesia in 2012, and for Kazakhstan in For instance, the real gross domestic product (GDP) growth of Viet Nam declined by 35.37% at the time of the global financial crisis (from the pre-crisis record of 8.2% in 2006 to 5.3% in 2009, as presented in Table A3.1). This is the year when the country borrowed from the CSF. Real GDP Growth Global Financial Crisis (2009) Eurozone Crisis (2012) Current Turmoil (2015) Bangladesh (13.64) (1.52) 0.00 Indonesia (16.36) 9.09 (12.73) Kazakhstan (88.79) (53.27) (90.65) Philippines (79.25) Viet Nam (35.37) (36.59) (18.29) Central Government Fiscal Balance Bangladesh (21.88) (12.50) (34.38) Indonesia (77.78) (100.00) (177.78) Kazakhstan (462.50) (450.00) (375.00) Philippines (254.55) (109.09) Viet Nam (783.33) (283.33) (350.00) General Government Revenues Bangladesh (2.80) 1.87 (10.28) Indonesia (20.94) (18.85) (31.94) Kazakhstan (10.04) (20.96) (19.65) Philippines (9.88) (10.49) (1.85) Viet Nam (10.10) (23.57) (25.59) Merchandise Export Growth Bangladesh (53.02) (71.16) (84.65) Indonesia (175.26) (110.53) (181.05) Kazakhstan (205.41) (94.59) (214.59) Philippines (241.67) (183.97) Viet Nam (139.21) (19.82) (65.20) JP Morgan EMBI Sovereign Spreads Bangladesh n.a. n.a. n.a. Indonesia Kazakhstan Philippines (24.53) (49.38) Viet Nam Personal Remittances Received Bangladesh n.a. Indonesia (18.75) (50.00) n.a. Kazakhstan n.a. Philippines (6.30) (22.83) n.a. Viet Nam 0.00 n.a n.a. The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, ( ) = negative, Board ADB of = Directors, Asian Development Management, Bank, or CSF staff, = Countercyclical and may be preliminary Support Facility, in nature. EMBI = Emerging Market Bond Index, GDP = gross domestic product, n.a. = not available; US = United States. Note: Pre-crisis EMBI data for Kazakhstan covers July December Data for 2006 is not available. Source: ADB Asian Development Outlook 2011: South South Economic Links. Manila; ADB Asian Development Outlook 2016: Asia's Potential Growth. Mania; Bloomberg LP; and World Bank Open Data (