The Implications of a Global Financial Crisis for Asia and the ADB: Lessons from Evaluation

This report reviews the emerging experience with the economic crisis emanating from the Euro area to draw implications of such situations for Asia and ADB. It draws on analysis within the ADB, in other international financial institutions (IFIs), and in the research community, with particular attention to the lessons from evaluations of past crises and IFI responses to them.

The paper presents the following conclusions:

• The evidence suggests that the probability of a major crisis in the Euro-zone over the next 12 months is not insignificant.
• The evidence also points to substantial spillover risks to Asia from such a crisis. However, risks vary notably across Asian countries, and these countries can do much to mitigate these risks.
• ADB and other IFIs can help, building on the lessons from evaluation of their responses to earlier crises, including the East Asian crisis and the 2008–2009 crisis.
• Actual events and developming member country (DMC) priorities will determine the shape of any ADB response, including crucially, the actual DMC fiscal, safety net, and financial sector policies that it would support.
• Going forward, ADB should take stock of its overall crisis preparation and response strategy. The most resounding lesson of multilateral development bank support for DMCs in responding to the 2008–2009 crisis is the importance of good preparation.