Global Trends by Martin Khor
Monday 27 April 2009
There is now
a debate whether the worst of the global economic crisis is over. Meanwhile,
recent reports and data show that the Asian region and particularly
An interesting debate is taking place: Has the global economy turned the corner, or are the so-called “green shoots” misleading because we are going to see even worse times ahead?
Some political leaders
in the West are grasping at a few good signs, such as the partial recovery
of the stock markets and a pick-up in the housing markets in the
But many economists are warning against premature optimism. They point to the continued existence of serious structural problems, such as the bad state of many big banks, the “deleveraging” that still has to be undertaken by households and financial institutions, and that the effects on the real economy have still a long way to run their course.
For some countries,
there are frightening scenarios ahead, particularly in Central and
Asia, and especially
A paper by the UN Economic and Social Commission for Asia and the Pacific (ESCAP) says the crisis in Asia has moved from stage one (financial crisis in developed countries with limited contagion in Asia) to stage two (great recession in developed countries and inevitable contagion in Asia).
In Stage 2, Asian
countries are hit by “plummeting exports, from the double-digit growth
of the past decade to double-digit declines, declining domestic demand
and rising unemployment.” The ESCAP paper was prepared for its annual
session, now taking place in
The depths of the export decline were reached by most countries in January, with falls (compared to 12 months previously) in Malaysia by 34%, Singapore (40%), Philippines (41%), Taiwan (44%), Korea (34%), Thailand (27%), Hong Kong (21%), China (18%), India (16%) and Japan (35%).
In February, the
degree of drop was less for most countries including
The trend in
The ESCAP report
warns that the decrease in imports is even more alarming, especially
the 43% drop in
It also warns that a further deepening of the crisis in manufacturing will lead to financial sector stresses through a rise in banks’ non-performing loans.
It projects unemployment
in the region to rise by up to 23 million workers in 2009. This appears
to be on the optimistic side, since there are already reports that over
20 million industrial workers had lost their jobs in the export-oriented
coastal regions of
in plunging, and the worst hit is
In East and North-east
Asia (which is dominated by
The ESCAP report does not give growth projections for individual countries. However, The Economist magazine provides its own forecast, and the figures in its latest issue are sobering.
The latest data
on industrial production show where the source of the problem is – countries
that rely on manufacturing exports are worst hit. Compared to a year
ago, industrial production has fallen in
In contrast, industrial
production rose by 8% in
The figures show
Many Asian countries,
The extent to which these policies have a positive effect remains to be seen, and further measures and adjustments will most likely be needed.