The Great Recession and Developing Countries
Figure 7.13. Net Funds Inflow 10
5
0 % GDP
320
–5
–10
–15
–20 Mar-03
Mar-04
net funds inflow: equity
Mar-05
Mar-06
Mar-07
net funds inflow: loans
Mar-08
Mar-09
net funds inflow: porfolio
Source: CEIC; BNM.
billion in the fourth quarter. For the full year of 2008, Malaysia saw an overall net outflow of US$5.4 billion. The change in Malaysia’s balance-of-payments trend has also been reflected in the country’s falling foreign reserves (Figure 7.14). Reserves had climbed steadily to a peak of US$122.8 [RM 410.8] billion in June 2008, then fell to US$113.3 [RM 379] billion in September, and further to US$94.7 [RM 316.8] billion in December. The outflow may have been the result of the withdrawal of foreign equity funds from Asia. This could reflect a greater aversion to risk as the bond market in emerging markets saw an increase in yields, or it could be a sign of a crisis-triggered capital outflow to lowercost countries, since Malaysia can no longer support low–value added industries.