26 August 2009 11:27 [Source: ICIS news]
SINGAPORE (ICIS news)--Asia cannot rely on exports in the near term as it seeks to recover from the global economic slowdown, but instead will have to rebalance its growth and focus on its domestic economy, a regional multilateral institution said on Wednesday.
“In view of the weak outlook for the major global economies, demand for Asia's exports is likely to recover only gradually,” the Asian Development Bank (ADB) said in its Key Indicators for ?xml:namespace>
“Asian economies are therefore unlikely to be able to export their way out of this slump, as they did after the 1997/1998 Asian financial crisis,” ADB added.
Exports had been the main engine of growth for Asian economies until external demand collapsed late last year as the world faced its worst recession since the Second World War.
With growing intolerance for current account deficits - a condition that occurs when an economy imports more than it exports - in the US and elsewhere in the world, Asia needed to focus on its domestic economy to propel expansion, ADB said.
The country’s exports in July slumped by 36.5% year on year to yen (Y) 4,844bn ($51bn), based on data from its Ministry of Finance released on Wednesday. Its imports fell 40.8% year on year.
ADB said that the
“As a result of the global financial crisis, GDP growth rates in 2008 were significantly lower than those in 2007, but they continue to be substantially above the growth rates of Europe and
ADB highlighted the need for the region to support its small and medium enterprises (SMEs), which are more oriented to the domestic economy but were still hit by the slump in external demand.
“Many SMEs do play an important role in exporting in some economies and industries. They also play an important role in the global production value chain, so that even when they do not export directly, their products can be important inputs into larger enterprises that are exporting,” ADB said.
ADB said steps must be taken to eliminate constraints to SME growth. This would help to lift domestic demand through job creation.
($1 = Y94.16)
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