Presentation contains a summary of households financial capabilities with actual data available in Oct 2009. Four countries considered by the team, Hungary, Korea, Iran, Yemen.
Winning Markets Through Strategic Planning, Implementation, and Control
Financial Capabilities Of Households Group 4 Final.Ppt
1. Financial Capabilities
of Households
Subject 4
eMBA – Goup 9
2009
Hussam Al-Hureibi, Mashid Moradi ,Philip You, Attila Sárkány
2. 1. Study of influential factors
1.1 Word Economic Outlook
1.2 Country level economic Outlook
Subjects will be presented in light of the economic crisis.
4. 1.Influential Factors
1.1 Word Economic Outlook
Economic crisis. Emerging markets (2)
Central –East Europ
bacame the epicenter
of econimic crisis after
stop of external bank
flows.
5. 1.Influential Factors
1.1 Word Economic outlook
Influence factors to household financial situation in
emerging market countries.
Before crisis :
Asset prices decoupled from developments. (not real)
During crisis
Sudden Lock up in financial markets.
Stop of bank inflows to emerging markets.
Increased vulnerability of households.
6. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (1)
•Political influence.
•Monetary policy
•Immediate impact on house
holds.
•False short term effects.
•No long term improvement
7. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (2) – IMF & WEO Growth projections
Before and after crisis
Growth projections by counties
involved in improvement programs.
8. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (3) – National Bank – Interest rates.
14,00
12,00
10,00
8,00
Direct influence household
6,00
capabilities.
4,00 Reflection of economy
2,00 performance and monetary
0,00
interventions to the market
2002.01.01
2002.05.01
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2009.01.01
2009.05.01
9. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (4)
Consumer price indices are only
influenced by the tax increase
CPI falls 1% under expectation.
Continued down trend.
Projections show below 2% at the end of
2010.
10. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (5)
!
•Better correlation to
household capabilities
•2003 - 2007 strugle
•Measures taken to improve
capabilities failed
•Delayed willingness to come
back
•Negative impact on
households
11. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (6)
Government debt as % of GDP
•In 2009 government financing
has been covered from
savings and short term loans
•Local Municipality costs have
been covered from savings,
equities and increased debt
12. 1.Influential Factors
1.2 Country level Economic outlook
Hungary (7) Stock exchange market
BUX Index
35 000,00
30 000,00
25 000,00 •No direct correlation to
20 000,00
BUX
governemnt capbilities
15 000,00
10 000,00
•Could be a reflection of
5 000,00
0,00
househod mood.
2004.01.05
2004.04.05
2004.07.05
2004.10.05
2005.01.05
2005.04.05
2005.07.05
2005.10.05
2006.01.05
2006.04.05
2006.07.05
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2007.04.05
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2009.07.05
13. Financial Capabilities of Household in Hungary
Definition of household
“Household is a group of people who independently of their degree of
familiar relation are forming one common income and expense entity in
which they bear partially or totally together the everyday life expenses.”
Under this definition, household are linked much less by familiar links but
rather by economical links.
It is also possible for one single person to form a stand alone household
entity.
As a consequence of the definitions households are not linked by common
living area and includes those in to the same entity who are temporarily away
(for studies or work) but they are maintained from the same spending or their
income will be part of the common expense.
14. Financing capability of
households ?
Households' financing capacity is the
difference between gross savings and
borrowings
Gross Savings - Borrowing
15. Hungarian Household Financial Capabilities
" #$ %
!
The Hungarian household financial capabilities are on a downturn with apparent
6 month delay to the economic crisis
17. Hungarian Household Financial Capabilities
New Mortgage Loans / FX loans
•Banks withdrawn from the
Fx loan market
•New loans increase.
•Banks reconsider risks.
•Households reconsider risks
18. Hungarian Household Financial Capabilities
Consumer & Housing Loans
Loans stay low during crisis. Uptrend after crisis in HUF loans.
Quick overtake of CHF loans by Eur housing loans.
Uptrend in HUF housing loans during after crisis.
No real down trend during the crisis of HUF housing loans.
22. Hungarian Household Financial Capabilities
Disconnect between government financial capability and household behavior.
Change in trend cause by economical crisis.
Significant amount of loans in foreign currency.
23. Hungarian Household Financial Capabilities
Financial capabilities by economical sectors
Corporations Government Households
24. LG–
{–›ˆ“ “–ˆ•š – –œšŒ–“‹ ˆš LG– nkwUG
j–•š–“‹ˆ›Œ‹ Šˆ›ŒŽ–™Œš
Housing loans in FX
Housing loans in HUF
Other FX loans
Other HUF loans
Increase in FX loans after year 2000
Trend is turning back following the economical crisis.
25. Hungarian Household Financial Capabilities
Reaction to economic crisis
Does not have
financial plan
Does have
financial plan
Always had a
since the start
financial plan
of crisis
26. Hungarian Household Financial Capabilities
Main Characteristics
2nd Qtr 2009 one year capability was 2,6 % GDP.
2nd Qtr 2009 is reaching as low as 0,4 % GDP
Increase in savings offset by withdrawal from Stock
market and investment funds.
3rd Qtr 2009 Draining of savings. No access to loans.
Value of FX loans have decreased due to HUF rate
improvements.
27. 1.Influential Factors
1.2 Country level Economic outlook
South Korea
Korea Economy - Overview
Type Description
Population 48.46 million (2007)
(foreign residents: 1.1 million)
Economically active population 24.2 million (2007)
Gross Domestic Product (GDP) $ 969.6 billion (2007)
Per Capita GNI $ 20.045 (2007)
GDP Growth Rate 5.5 percent (2007)
28. South Korea
Korea has been rapidly integrating itself into the world economy since the
onset of the 1997 financial crisis. The Government has advanced a new
paradigm that involves upgrading business practices to international
stands, promoting human resources and technology development and
enhancing institutional efficiency.
29. GDP
South Korea is a major economic power and the South Korean economy is one
of the four largest in Asia with Gross Domestic Product (GDP) measured on
purchasing power parity basis at $ 1.2 trillion. The nation has one of the
highest GDP per capita in Asia, more than $ 20,000 according to the
International Monetary Fund.
South Korea GDP Growth Rate
30. Household Debt in Korea
Currently, the total household debt is 802 trillion won (approximately 68
billion USD).
Although, Korea is not the epicenter of the global financial crisis, the government
took on such strong measures as drastic rate cuts, massive liquidity injection and
deregulations of the real estate market. The Bank of Korea lowered its benchmark
rate by 3.25 percentage points to 2.0% in early 2009 from 5.25% in late 2008. In
addition, it reclassified speculative housing investment and overheated
speculative investment zones with the exception of main city centre, in an effort
to revitalize the sluggish real estate market. This contributed to the sharp increase
in home equity lone.
31. Household Debt in Korea
The debt of the Korean households reached 82 percent of GDP in 2007
32. The main reason of Household Debt
The main reason
•Household Debt is home ownership decision of household
•Low Interest rate (current interest rate 5.63% on housing loan.)
33. The average monthly expenditure per house household
The average monthly income per household amounted to 3,299 thousand won
(approximately $ 2,800 USD) in 2009. The housed expenditure per household
marked 2,663 thousand won (approximately $ 2,200 USD) in 2009.
34. Private Consumption
Even if the private consumption rate has been decreased, consumption on
Education section is never decreased.
35. Saving Rate
Over the past few years, the nation’s savings rate has continued to decline as
consumption grew at a much faster pace than income amid low interest rates.
36. Unemployment rate
The total number of works hired decreased year –on-year affected by low
employment in the private sector in particular manufacturing and construction due
to the global crisis driving sluggish domestic demand and falling export.
In Korea, the current unemployment rate is 3.7%.
37. Unemployment Rate & share of employed by industry
Every year, the trend of employed by industry has been change that manufacturing sector
which is Korea foothold to develop the economy is decreasing while the service industry (e.g
healthcare & social welfare services, real estate & renting services and financial & insurance
services)) is continue to grow up with year-on-year. The main reason of decline in
manufacturing sector is due to the high competitiveness and low margin which can not
sustain the businesses afloat in the market.
38.
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42. p™ˆ•Gnkw
GDP - real growth rate
This entry gives
GDP growth on an
annual basis
adjusted for
inflation and
expressed as a
percent.
43. w™ŠŒG{™Œ•‹GT p•“ˆ›–•Gyˆ›ŒG•Gp™ˆ•
Consumer Price Index Annual Change
Definition: This entry furnishes the annual percent change in consumer
prices compared with the previous year's consumer prices.
44. kŒ‰›GT ŒŸ›Œ™•ˆ“
$21.92 billion (31 Dec 2008 est.)
$20.68 billion (31 Dec 2007 est.)
The Iranian government has
made debt reduction one of
its top priorities.
Iran was forced to
reschedule much of its
foreign debt in 1992. Since
then, it has been diligently
paying off what it owes, in an
effort to improve access to
longer-term financing.
As a result, Iranian letters of
credit are much better
received now than they were
two years ago.
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50. p•›Œ™Œš›G™ˆ›ŒG–™ŒŠˆš›G
Iranian government should reform the monetary policy to accelerate the economy
and provide better options for households by low-interest rate in housing loan
and secure the job for young generation.
53. Loans per family
SFD (Social Fund for Development) is responsible for giving loans in Yemen
with World Bank assistance (IDA credit) $75 million
* Amount of average micro loan per family: $109–$271
* Number of micro loan recipients in Yemen: 25,000
* The responsible for giving loans in Yemen is the SFD
(Social Fund for Development), with the help of World Bank (IDA credit)
* The total project cost: $175 million , ($75 million World Bank assistance)
Type of loans that are most specific
Small Business Loan
Personal Loan
Farming Loan
54. Household income or consumption by percentage share
Lowest 10%: 3%,
Highest 10%: 25.9%. (2005)
About interest in Yemen
The monthly interest in Yemen is about only 2%
Such services were not common in the market because of religious and
commercial reasons which made people mistrustful towards the services in the
beginning. (Islamic banks are not charging interest over the credits
extended to the microfinance associations)
55. Investments of households in YEMEN
The most important opportunities among the many attractive investments are :
* in utilizing natural Recourses, (such as 1. Cement production facility 2.
Ammonium Nitrate Fertilizers 3. Wall Tiles production)
* in Agriculture, (such as 1. Starch production 2. Vegetable oil production 3.
Coffee grinding and packaging)
* in Tourism (such as 1. Developing coastal resorts 2. Tourists transportation
vehicles /Air and Land/)
* and in many others (such as Glass manufacturing, Cement manufacturing, Car
assembly, Household electric appliances, Iron fusion and other iron products,
etc.)
57. Hungarian Household Financial Capabilities
Plans of Hungarian households.
Does not plan to start
savings
Did not start savings but
have plans to do so.
Have decreased
their spendings
58. World financial outlook projections
Massive increase in deficiencies has been prevented in countries acting under
IMF improvement programs
59. Public debt dynamics
Hungary stands out as a country with significant debt substainability problem
60. Hungarian fiscal structural reforms affecting
household capabilities.
•Pension system reform
•Social transfers
•Subsidies
•Tax and spending reforms
•Shift the burden from labor to consumption.
•Boost labor participation and potential growth.
•Institutional reforms. Fiscal responsibility law.
Debt restructuring
•Exchange rate stability programs.
•Partial mortgage guaranty
61. Hungarian governmental decisions
adversely affecting households
Eliminating without phasing out:
subsidies to home buyers.
energy subsidies.
Containing the wage growth in the public sector.
Encouraging efficiency gain in the public service area.
62. Scope of Hungarian governmental protection
schemes for households.
Provide incentives to reduce depth burdens
Safeguard credit discipline
Minimize liabilities to public financing
Extend mortgage debt financing.
Temporary Lower Burden
63. Future improvement of household - Korea
•Real estate price need to be stabilized in a bid to slow down the sharply
accelerated growth of household loans.
•The saving ratio needs to be raised by improving the income situation of
households through active job creation and guarantee job security.
•The social safety net for the less-privileged, including low-income groups and the
elderly, needs to be strengthened to counter the sharp contraction of household
consumption during economic downturns.
* Stabilizing financial markets, improving consumer sentiment, and easing
inflationary pressure are necessary tasks has to be taken in order to contribute to
the recover of consumer spending.
