IMPACT OF FINANCIAL CRISIS IN THE UNITED STATES TOWARDS THE ASIA ECONOMY

Abstract

The world recession or world financial crisis in 2008 was primarily triggered by housing credit crisis (subprime-mortgage) in the United States of America. Financial crisis in the United States has resulted in the collapse of large financial institutions in the United States, Europe and Japan. Clogged credit as huge as US$ 1.8 quintillion predicted to cause potential loss of more than US$ 300 billion, according to monetary experts it could be more than US$ 1 trillion. Clogged credit led to credit crunch that had great impact on real sector. Financial institutions become illiquid, Federal reserve rate was on a high constantly, weak demand, decrease production, oil price attack on the flank until United States economy suffered stagnation. This financial crisis was a serious condition hit by high world oil price, raised commodity prices and falling consumption, high Fed rate, fall in production, soaring inflation, rising unemployment rising, fall of stock price, negative growth economy, until United States economy experience stagflation. The global recession hit Asia hard on its economy mainly manufacturing, which depended on industrialize economies for their market. The export potential Asia to United States is as big as 63%, until economy stagnation of United States caused significant decline in Asia economy. Fortunately, Asian countries have strong domestic demand (largely populated as China, India and Indonesia) managed to drive the economy towards positive growth in 2008 (China 10.8%, India 8%, Indonesia 6.2%) although the growth percentage of the world economy was below zero.