September 1, 2010
(“Nezavisimaya gazeta”. Print Edition. №185, Page 5. Column “Ideas and peoples”; “Nezavisimaya gazeta”. Internet Edition: http://www.ng.ru/ideas/2010-09-01/5_crisis.html; “Dialog.UA”. Independent informational-analytical resource. http://dialogs.org.ua/issue_full.php?m_id=19506; Interstate Broadcasting Company “Mir”. “Gulnara Karimova told about prospects for leading developing Asian economies” http://mirtv.ru/content/view/111452/45/; Media coverage on television channel “Mir”: http://mirtv.ru/content/view/111477/107/)
In the last decade the leading Asian economies have become a kind of locomotive of global economic growth, exerting a major impact on world trade, the market of raw materials and investment flows. Countries such as China and India have demonstrated strong trend of GDP growth at 10-11% and 6-7% a year respectively. Taking this into consideration, international analytical circles, relying on the extrapolation method, have made a conclusion that in perspective economic and financial center of the world will eventually shift to the Asian region.
However, the global economic crisis has made significant adjustments to the forecasts, highlighting a number of vulnerabilities of Asian economies, particularly its major emerging industrial centers.
First and foremost, it is the nature of the structure of economies, which are largely export oriented. Huge production capacity of Asia is aimed at foreign markets, such as markets in North America and Europe that form the lion's share of world demand. Therefore, the problems in these markets could not but affect the positions of Asian exporters.
Reduction of demand in the U.S. and the EU because of the crisis almost immediately reflected in the countries of Asia, forcing them to go to the adoption of emergency anti-crisis programs, in which one of the key seats were allotted to stimulate domestic demand and to support national producers. Thus, an attempt was made in the shortest time to correct the imbalance in the over-reliance on the export economy. For instance, for this purpose China sent about $600 billion. Experts believe that such measures helped to offset the fall in exports, to maintain economic growth in Asia and eventually to stabilize the global economy and to support the commodity market.
Without doubt, anti-crisis programs have played an important role. But at the same time, we must not forget that the positive effect in Asia was not achieved solely by them, but also largely due to the fact that the measures in Asia coincided with emergency programs to rescue the national economies and financial-banking systems that were running in the U.S. and Europe.
Paulson's plan and Obama's plan made it possible to block dangerous trends in the largest American economy, thus minimizing the loss in its consumer market, making it possible for the Chinese and the whole Asian exports to keep a significant niche in it. A similar effect was observed in Europe.
Hence, reducing the impact of the crisis on Asia has been achieved due to the multiplier effect of its anti-crisis steps and crisis management measures of the U.S. and the EU. Certainly, the overall growth rate of GDP of Asia in 2009 compared to 2008 slightly declined, for example, in China from 11% to 8.5% and in India from 6.8% to 5.5%. But it is much better than what could happen if the crisis continued to deepen.
Today, most reputable international institutions have a positive look at the prospects of the global economy revival.
According to the April forecast of IMF, the global economy will grow at 4.1% this year, while the forecast was increased by 0.2% compared with the March forecast. Indicators of the United States will amount to 3%, and Germany – 1.2% (due to the necessity to solve Europe's financial problems, such as the crisis in Greece). In turn, the World Bank is a little less optimistic. WB forecast for the global economy is 2.7%, although, its experts point out that 2010 can be called “the year of economic recovery”.
Special emphasis is being given to the role of Asia in revival of global growth. As the ADB President H.Kuroda noted during the 43rd annual meeting of the Bank in Tashkent, “developing Asia is rapidly recovering from the crisis and moving toward the V-shaped recovery. If in 2007 the growth was 9.6%, in 2009 it dropped to 5.2%. Now, the ADB expects growth of Asian economies to 7.5% in 2010 and about 7.3% – in 2011. China will continue to be the engine of the growth, the GDP of which is expected to increase up to 9.9% in 2011”.
At the same time the crisis has taught one important thing, namely, the elaboration of the more conservative forecasts with a careful analysis of the full range of possible crisis aspects. Relying on such a condition, it should be noted that in reality the crisis effects of the global economy are still far from settled. Its prospects are uncertain, even despite some recovery, and with it prospects for Asia also seem vague.
Key reason is that the nature of the crisis in the global economy has not been yet defined up to the end – is it just a recession or a general structural crisis of the modern economic model. Depending on which of the two types is taking place, the basic premise for the situation analysis and forecast of future development can be defined.
Assuming that the crisis is structural in nature, it is realistic to expect new challenges in the global economy. Events around the problems of Greece and the threat of sovereign defaults of a number of European countries, putting at risk the future of the euro zone, show that complexities in the global economy persist, and this means that theoretically they also remain for the economic future of Asia.
If the “second wave” will break out, then there will begin sad days for the Asian countries again, because the fundamental reasons, for which it can hit at the leading developing Asian economies, have not been fully eliminated. Further reduction of global demand, particularly in the markets, importing goods from Asia, re-actualizes the issue of compensation of the fall of exports at the expense of the capabilities of its domestic markets.
Theoretically, the leading Asian developing economies are able to solve the problem of stimulating domestic consumption. First of all, they possess a hard enough regulatory role of the state, which facilitates process of planning and execution of designated measures. They may also rely on substantial international reserves, volume of which by China, for example, has already reached $2 trillion. The most important factor speaking in favor of Asia is the existence of a huge population, which is able to generate the largest consumer market in the world.
However, even by a coherent and consistent implementation of these capabilities, one complex problem still remains – problem of timelines. Its essence lies in the fact that between the start of the fall of imports in foreign markets and launch of process of compensating development of the domestic consumer market there will be a time-lag varying degrees of duration.
During this time-lag Asian exporters will face two problems – either to halt export-oriented production capacities, resulting in a worsening problem of unemployment, or to maintain an artificial production capacity load, taking into account the gap in pricing between goods of external and domestic consumption, until domestic demand can be seriously boosted, able to consume these products. Both alternatives seem very risky.
It should be also noted that the policy orientation towards domestic market could have serious consequences for the established structures of global economic relations. In fact, course of Asia's leaders to domestic market may lead to the turn of globalization of economic relations to their regionalization, which would have quite serious implications for virtually all segments of the global economy, ranging from trade and investment, and ending with labor migration and exchange of scientific and technological know-how.
Prospects for export oriented developing economies of Asia: the risks are remaining
