Economic ResearchPublicationsResearch PapersEmerging MarketsAsia and the global economic crisis: Challenges and opportunities

Asia and the global economic crisis: Challenges and opportunities

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Asia was hit particularly hard by the financial and economic crisis as booming exports had been the major driver of economic growth in recent years. Between 2004 and 2008 real gross domestic product in the region rose by an average 8% a year, making Asia the most dynamic region in the world by a long way. The heavy reliance on exports resulted in an economic slump in the financial and economic crisis, on a scale last seen in the Asian crisis of 1997/1998. For 2009 we are forecasting fairly low growth of 2.7% for the region.


, Jun 03, 2009

However, in all probability Asia will be spared a prolonged period in the doldrums. Apart from the improvement in the global economic outlook the main reasons for this can be traced to the region’s relatively robust banking system, large currency reserves and current account surpluses, and low foreign debt.

What is striking about the current situation in Asia is the very marked gap in performance between the individual countries. Broadly speaking countries with a large and robust domestic market will see a marked slowdown in growth this year but they will be spared the economic contraction which will afflict the smaller export-dependent countries. As world trade stabilizes in the second half of 2009 we expect the economy to pick up across the region. For 2010 we are forecasting growth of 5.6%, double this year’s rate.

Given the dramatic slide in US imports and the importance of the USA as a sales market, the Asian growth model is set to change. Export momentum will be lower than before the crisis and trade surpluses will decline. In order to achieve strong growth in the future, the Asian emerging markets are rightly attempting to bolster domestic demand in the medium term. In the foreseeable future it is unlikely that the US will re-emerge as the source of such powerful demand and import growth.