Today, I will focus on one major impact of the current financial crisis on Asia-Pacific, that is, the decline in domestic demand. Particularly, I want to talk about the factors leading to declines in domestic demand.

Equity markets in developing countries around the world have suffered large decreases in value since mid-September 2008, reflecting a global credit crunch and a worldwide flight to safety among investors.

These declines are expected to cause a number of effects that will dampen domestic demand, especially personal consumption and corporate investments. Although equity market investments only constitute a small percentage of overall household wealth and equity financing consists of relatively a small portion of corporate investment in Asia-Pacific as compared with developed countries, the declines will affect the more advanced economies of the region, such as the Republic of Korea, Singapore and Hong Kong of China.

Secondly, declines in property markets will further dampen domestic demand. The reduction in housing prices will have an effect on real estate investments, which have played a particularly important role in the growth of domestic demand in a number of countries--most notably in China, where the property sector accounts for about one quarter of all investment.

Private consumption will also be affected by the fall in property prices, particularly in the more advanced economies in the region, where property assets account for a more significant portion of household wealth.

Thirdly, reduced bank lending is the most significant factor curtailing corporate activity and domestic demand.

The concern here is that an increase in non-performing loans will result in greater restraints on and a reduction in new lending, leading to possible higher costs for new borrowers. Increased borrowing costs may in turn add further pressures resulting in a greater number of corporate defaults. Today, I will focus on one major impact of the current financial crisis on Asia-Pacific, that is, the decline in domestic demand. Particularly, I want to talk about the factors leading to declines in domestic demand.