Crisis Impact
Real Economy

The global economic crisis has affected the region largely through the collapse in trade and demand for goods and services. As import demand faded in the advanced economies and their recessions set in, export growth plunged in East and Southeast Asia and South Asia. It was down by about 30% and 10%, respectively, in the two subregions in January 2009 as compared to the last quarter of 2008. Weakening consumption and investments at home have compounded these problems: reduced access to domestic and international finance (including trade finance), slimming foreign direct investments and other capital flows to the region, lower commodity prices, and declining remittances. All these have resulted in major decline in GDP from the decade high peaks of 9.5% in 2007 down to estimated 3.9% in 2009.

Despite the economic slowdown in the region this year, developing Asia has proved to be more resilient than earlier estimated. Asia is leading the recovery from the global downturn with a robust forecast of 6.4% in 2010 due to a much stronger growth in East Asia and South Asia. (See revised graph below)

Sources: Asian Development Outlook (ADO) 2009, and ADO 2009 Update

ADB recommends in the Asian Development Outlook (ADO) 2009 that the region needs to rebalance its growth toward more national and regional demand. A more balanced growth would contribute to more employment generation, and make the economies more inclusive and reduce inequalities in the region. Another lesson from the ADO 2009 Update is to address the geographically unbalanced structure of the flows of the region's trade, capital, and workers. Policies to build up domestic capacity and enhance regional cooperation are necessary to strengthen the resilience of regional economies and reduce their vulnerability to external shocks.