Yearender: Developing Asia leads global economic recovery

by Prime Sarmiento, Cai Ordinario

MANILA, Dec. 22 (Xinhua) -- Developing Asian economies are leading the global recovery from the worst recession since the Second World War thanks to swift government response that allowed the region to keep most of its hard-won economic gains.

Multilateral lenders have upgraded their growth forecast for the region, impressed by its resiliency amid the meltdown. In its report issued December, the Asian Development Bank raised its GDP forecast for this year to 4.5 percent, up from the September forecast of 3.9 percent.

In November, the World Bank revised its projection for real GDP growth in developing East Asia to 6.7 percent, or 1.3 percentage points higher than its April forecast.

"Developing Asia, in general, is already on the way to recovery. The year 2010 should see faster growth compared to this year," Cayetano Paderanga, economics professor at the University of the Philippines and former Philippine Socio Economic Planning Secretary said in an interview with Xinhua.

The global recession, which started late 2008, slowed the U.S. and Western European economies, shrinking demand in these countries. This hurt Asia most as its economies were powered by its manufacturing sector that exports most of its produce -- from electronics to garments -- to industrialized economies.

In the first quarter of the year, several Asian-based manufacturers had to cut production and their labor force, as orders from abroad dried up. In Cambodia, for instance, numerous garment companies closed shop owing to the sharp decline in garment exports to its main market -- the U.S.

Thai automotive industry's exports and production fell 40 percent in the first quarter, pushing the car manufacturing firms to retrench 100,000 workers. In Malaysia, where electronics account for nearly 40 percent of total exports, electronics manufacturers laid off contract workers and reduced working hours to stay afloat amid declining shipments.

Joblessness, wage cuts and freeze hiring expanded poverty incidence and reduced demand. Consumers tightened their purse strings, dampening growth in consumption-driven Asian economies.

Thailand, Singapore and Malaysia fell in to recession. South Korea's GDP contracted to an 11-year low of 4.3 percent in the first quarter. The world's fastest growing economy -- China -- only expanded by 6.1 percent, its worst performance in nearly two decades.

Others may have been more resilient, as they're less dependent on exports, but growth rates slowed nonetheless. The Philippines registered a nearly flat growth, while India slowed to 6.1 percent.

The succeeding months, however, were a time for rebound. As Jong-Wha Lee, ADB's Chief Economist stressed in a statement issued December, the global economic situation is "changing rapidly."

"The prospects for much of the region look rosier than they did in September when we (ADB economists) last did a full study of the region. Fiscal and monetary stimulus policies and a moderate improvement in the G3 economies of Europe, Japan and the U.S. helped East Asia and Southeast Asia in particular," Lee said.

Increased public spending -- to finance big ticket infrastructure projects and social welfare programs -- provided jobs and much needed cash to those retrenched by the crisis.