Impact of Crisis:

As mentioned, the impact of  the financial crisis ranged from the financial and banking spheres to general economic and social conditions. Some  of  the major dimensions of the impact are surnmarised below.

• Economic growth turned negative.
• The  currency devaluations exerted immediate upward pressure  on  the prices of  imported goods and services or goods with high import content.
• Inflation generally increased.
• Since food prices generally increased more rapidly than non-food prices, the impact of inflation was harsher on the poor.
• Inflation not only reduced purchasing power but along with the  collapse of stock markets and banks also drastically reduced the  real  value  of household savings.  
• Bankruptcies resulted in loss of savings  and contributed to unemployment.
• In terms of the social impact,  overall the unemployment rates increased in all the countries affected by the crisis.

• The  informal  labour  force  expanded with  the entry of  the unemployed from the formal sector, resulting in lower earnings per worker.
• The share of wage and salary incomes in  total income declined, thereby altering functional income distribution.

• All  these together led  to  increasing poverty levels. A common feature of the crisis was that increases in poverty were greater  in the urban areas  than in the rural areas.