Several countries accumulated large external debts (Figure 8), largely private and denominated in foreign currency, making them vulnerable to a reversal of the capital flow or depreciation of the currency. When the global crisis began to impact on these countries, there was a sharp decline in capital inflows and a consequent slowdown in bank credit (Figure 9).
As we have witnessed so clearly in recent years, the resulting enhanced growth of productivity will lift our standard of living. 2  BIS Review 6/2002  The economic and financial developments I have described, of course, have important implications for the federal budget and can help explain a significant portion of the shift in the budget situation over the past year.