ABC Radio Australia
The global financial crisis is fast becoming a disaster for the world's poor.
The World Bank has released a dire forecast for the international economy, saying it will shrink for the first time since World War two. It says falling trade will hit the East Asia region the hardest, with developing countries facing possible catastrophe. It means more poverty and hardship with governments likely to be starved of money. But there are a few glimmers sunshine in the gloom.
Presenter: Karon Snowdon
Speakers: Richard Martin, Managing Director of IMA-Asia; Ashok Sharma, the Asia Development Bank
SNOWDON: The latest World Bank report is grim reading. The global economy will shrink for the first time since World War Two and trade will experience its biggest fall in eight decades. The greatest losses will be in East Asia. As if to highlight the speed of the turnaround - Japan the world's number two economy also just recorded its first current account deficit in 13 years. At almost two billion dollars in the red it's a massive fall from the 18 billion dollar surplus for the same period last year.
Richard Martin, Managing Director of IMA-Asia agrees the world faces recession.
MARTIN: We're expecting a contraction for the whole global economy of around one to two per cent this year. Most of that is going to occur in the northern hemisphere, but it will not miss Asia. Asia is still going to do better but the financial crisis we saw last year in the northern hemisphere becomes Asia's manufacturing crisis this year. And it'll certainly pull growth down in the region.
SNOWDON: The World Bank says developing countries, previously on the sidelines, could be facing crisis, especially where poverty is already high.
The most concern is for the poor in Africa but Asia is not immune. This latest report comes on top of one in February saying 53 million more people could be trapped in poverty as a result of the global slowdown. The examples are mounting...more than half a million jobs were lost in India in the last three months of 2008. Cambodia has lost 30,000 jobs in the garment industry, its only significant export.
The Bank says governments of developing countries could face the additional problem of not being able to raise money and experience a funding gap of between 300 and 700 billion US dollars as export income disappears. It says they'll face a credit squeeze as rich nations suck up scarce finance.
Ashok Sharma from the Asia Development Bank told Stephen Long some government bonds - that's the way governments raise money - will have no buyers.
SHARMA: In fact even in Germany which has about the most liquid bond market two bond issues of ten years have failed in the market so you can imagine what will happen to emerging countries.
SNOWDON: Richard Martin from IMA-Asia says Eastern Europe is in real trouble but the picture is more mixed in Asia.
MARTIN: The big picture is right now we have a US government rapidly ramping up its deficit and pushing up public debt towards 70 per cent of GDP. By contrast the picture across in Asia is we have China with relatively low levels of public debt 24-25 per cent of GDP and plenty of scope to fund its deficit out of its domestic market. And that's what makes people confident China will pull off quite a big fiscal stimulus this year. Elsewhere it's a bit patchy in the region. Most of Asia if we exclude Japan has done an excellent job of reducing public debt in the eleven years since we had the Asian crisis. So a lot of Asia or a fair amount of Asia is in a position to apply a fiscal stimulus now. And in that favourable group you'd put the two city states of Singapore and Hong Kong, Korea, Taiwan would fit in there, Australia and New Zealand will fit in there. Now the countries not in a position to do it are Vietnam, India, Philippines and Indonesia, though those last two seem to be getting through ok on their fiscal management.
The World Bank has released a dire forecast for the international economy, saying it will shrink for the first time since World War two. It says falling trade will hit the East Asia region the hardest, with developing countries facing possible catastrophe. It means more poverty and hardship with governments likely to be starved of money. But there are a few glimmers sunshine in the gloom.
Presenter: Karon Snowdon
Speakers: Richard Martin, Managing Director of IMA-Asia; Ashok Sharma, the Asia Development Bank
SNOWDON: The latest World Bank report is grim reading. The global economy will shrink for the first time since World War Two and trade will experience its biggest fall in eight decades. The greatest losses will be in East Asia. As if to highlight the speed of the turnaround - Japan the world's number two economy also just recorded its first current account deficit in 13 years. At almost two billion dollars in the red it's a massive fall from the 18 billion dollar surplus for the same period last year.
Richard Martin, Managing Director of IMA-Asia agrees the world faces recession.
MARTIN: We're expecting a contraction for the whole global economy of around one to two per cent this year. Most of that is going to occur in the northern hemisphere, but it will not miss Asia. Asia is still going to do better but the financial crisis we saw last year in the northern hemisphere becomes Asia's manufacturing crisis this year. And it'll certainly pull growth down in the region.
SNOWDON: The World Bank says developing countries, previously on the sidelines, could be facing crisis, especially where poverty is already high.
The most concern is for the poor in Africa but Asia is not immune. This latest report comes on top of one in February saying 53 million more people could be trapped in poverty as a result of the global slowdown. The examples are mounting...more than half a million jobs were lost in India in the last three months of 2008. Cambodia has lost 30,000 jobs in the garment industry, its only significant export.
The Bank says governments of developing countries could face the additional problem of not being able to raise money and experience a funding gap of between 300 and 700 billion US dollars as export income disappears. It says they'll face a credit squeeze as rich nations suck up scarce finance.
Ashok Sharma from the Asia Development Bank told Stephen Long some government bonds - that's the way governments raise money - will have no buyers.
SHARMA: In fact even in Germany which has about the most liquid bond market two bond issues of ten years have failed in the market so you can imagine what will happen to emerging countries.
SNOWDON: Richard Martin from IMA-Asia says Eastern Europe is in real trouble but the picture is more mixed in Asia.
MARTIN: The big picture is right now we have a US government rapidly ramping up its deficit and pushing up public debt towards 70 per cent of GDP. By contrast the picture across in Asia is we have China with relatively low levels of public debt 24-25 per cent of GDP and plenty of scope to fund its deficit out of its domestic market. And that's what makes people confident China will pull off quite a big fiscal stimulus this year. Elsewhere it's a bit patchy in the region. Most of Asia if we exclude Japan has done an excellent job of reducing public debt in the eleven years since we had the Asian crisis. So a lot of Asia or a fair amount of Asia is in a position to apply a fiscal stimulus now. And in that favourable group you'd put the two city states of Singapore and Hong Kong, Korea, Taiwan would fit in there, Australia and New Zealand will fit in there. Now the countries not in a position to do it are Vietnam, India, Philippines and Indonesia, though those last two seem to be getting through ok on their fiscal management.
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