AOGC '09: ADB urges Asia to be less reliant on exports

08 June 2009 06:36  [Source: ICIS news]

By Bohan Loh

KUALA LUMPUR (ICIS news)--Asia can play a key role in reviving global demand by boosting domestic consumption and by becoming less reliant on exports, a top economist from multilateral institution - the Asian Development Bank (ADB) said on Monday.

Exports had spurred the region’s rapid economic expansion and turned out to be its most vulnerable spot when the slump in global demand occurred.

The region's imports, on the other hand, had been significantly smaller, resulting in strong trade surpluses like in the case of China.

“Asia’s large and persistent current account (CA) surpluses have contributed to the global imbalances that underlie the current economic crisis,” said ADB principal economist William James at the 14th Asia Oil and Gas Conference (AOGC ’09).

CA is a measure of an economy's trade in goods and services with the rest of the world.

Medium-term efforts should be towards shifting from excessive reliance on external demand from the US, Europe and Japan and focusing on domestic demand particularly in much-needed infrastructure, James said.

Asian governments must resist from throwing trade barriers during periods of economic turmoil and must cooperate to prevent excessive volatility in the foreign exchange rates in order to boost trade, he added.

ADB forecasts developing Asia’s GDP growth to slow to 3.4% this year from 6.3% in 2008, before bouncing back to 6% in 2010.

“In all likelihood, a regional recovery in Asia will have to wait until 2010 if and when the world economy bounces back to positive growth,” he said.

But James warned that the outlook for recovery remained overshadowed by serious downside risks.

Over-reliance on exports would restrain the economic expansion of most emerging markets in the region for years with the exception of China and India, said Michael Spencer, chief economist and head of global markets research at Deutsche Bank.

“We expect that recovery will be an unusually slow one, just as this is an unusually deep and long recession,” said Spencer who was also attending the AOGC ’09.

Given this scenario, he said global oil demand would decline by at least 2% this year and stay soft in 2010.

AOGC ’09 is an industry-wide forum attended by participants of the oil and gas sectors would be concluded on Tuesday.

($1 = €0.72)

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