Global trade to shrink further this year

CEBU, Philippines – Although the impact of the global economic crisis varies from one country to another, the Philippine Institute for Development Studies (PIDS) projected a general slowdown in most economies this year.

PIDS president Josef T. Yap said that the global outlook for 2009 remains dim as world trade is seen to decrease by 3.5 percent this year from the 6.2 percent growth last year and the growth rate in the previous year at 7.5 percent.

He said that the synchronized recession is a rare event wherein small and even major economies will experience it.

The gross domestic product growth of industrial countries, which include the United States, Japan and the 15 member countries of the Eurozone will contract by 2.6 percent this year from its 0.7 percent growth rate last year, however recovery is seen in 2010 with 1.1 percent growth.

The inflation rate will also decrease by 0.3 percent from 3.2 percent last year and 2.2 percent from last 2007.

Yap said that the contraction of export markets will generally affect Asia.

He said that the performance of Asian exports in the last quarter of last year contracted by 20 percent. In the first two months of this year, exports contracted further with the Philippines and Taiwan being the region’s worst export performers.

Yap said that the global financial crisis has limited impact on the financial sectors of the East Asian region.

 He said that according to a report made by the Asian Development Bank (ADB), the relative resilience of the regional banking and financial systems in East Asia reflects factors which include the very limited direct exposure of the region to toxic assets such as the sub prime and other related scrutinized products.

Because of impaired loans from the Asian financial crisis, there has been a relatively strong bank balance sheet that improved risk and liquidity management as well as strengthened supervisory and regulatory systems in the region.

Despite the uncertainty as to the length and depth of the recession, Yap said there should be regional responses within East Asian countries with proper coordination to avoid perception of protectionism, acceleration of intraregional trade and investment and the strengthening of the local and regional financial markets.

“There should be a coordinated stimulus package for the region to achieve coordination that can restructure the growth. We should pull together all our resources and help countries in their infrastructure programs so we can rebalance growth in East Asia,” said Yap. – THE FREEMAN