The impact of the global economic crisis on Asia has been swifter and faster than for other regions, partly because of Asia’s export dependence and close integration into the global economy, according to IMF Survey Magazine.
GDP in emerging Asia, excluding China and India, plummeted by no less than 15 percent on a seasonally adjusted annualized basis in the last quarter of 2008, with the IMF forecasting an average decline for this category of Asian countries of 2,9 percent for 2009.
– In many ways, this severe impact was unexpected. Asia is far from the epicenter of the crisis, not just geographically but also in the sense that it did not indulge in the financial practices that led to serious problems in advanced economies’ banking systems,” the IMF said in its Regional Economic Outlook: Asia and Pacific, published on Wednesday.
Moreover, before the crisis the region was in sound macroeconomic shape, and thus in a strong position to resist the pressures emanating from advanced economies. In the event, however, the impact on Asia has been even swifter and sharper than in other regions.
Collapse in demand for exports
The report said that the sharp impact of the global economic crisis on Asian economies is explained by the region’s exceptional integration with the global economy. The spillover has been amplified by Asia’s product mix, because the region is specialized in sectors particularly affected by the global credit crunch.
Much of Asia relies for its growth engine on high-and medium- technology manufacturing exports—in particular, motor vehicles, electronic goods, and capital machinery. The demand for advanced manufacturing has collapsed—Japanese auto exports, for example, have fallen by nearly 70 per cent between September 2008 and March 2009. At the same time, Asia’s financial ties with the rest of the world have deepened over the past decade, exposing the region to the forces of global deleveraging.
Asia’s tightly integrated supply chain propagated the external demand shock rapidly across the region, reflecting the collapse in demand from advanced economies and having dramatic effects on intraregional trade. Between September 2008 and February 2009, merchandise exports fell at an annualized rate of about 70 percent in emerging Asia—about one and a half times more than during the information technology (IT) sector bust in the early 2000s and almost 3 times more than during the Asian crisis in the late 1990s.
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