Fears on impact of Asian crisis overblown, says WTO
Fears on impact of Asian crisis overblown, says WTO
GENEVA (AFP): Fears that limping Asian economies will export their way back to health, harming business in developed economies, are unjustified, the World Trade Organization said in a report issued yesterday.
But a slowdown in Asian and U.S. economic growth rates could lead to a cut in global trade of two to three percentage points in volume terms in 1998, the WTO report on 1997 trade developments warned.
Exports of goods globally jumped by 9.5 percent in volume terms last year, the second-best result in 20 years and above WTO forecasts.
Many pundits worry that the recent round of Asian currency devaluations will lead to a flood of cheap imports into rich countries, damaging some of their industries, slowing economic growth and boosting unemployment, the WTO said.
"These fears would seem to be largely unjustified as far as countries outside the Asia region are concerned."
The WTO concluded that exports from Malaysia, Thailand, Indonesia, South Korea and the Philippines, countries battered by the turmoil, would grow this year but not as rapidly as might have been expected given the massive falls of their currencies against the dollar
The five countries as a whole account for just 3.6 percent of global gross domestic product, around seven percent of world trade, and six percent of global foreign direct investment.
Asia as a whole accounts for 8.6 percent of U.S. imports and five percent of West European imports. Japan, in contrast, takes 16 percent of the region's imports.
Thus, even if Asian exports to the West rise by 20 percent, "this would not cause a significant problem" for the trade or current account ledgers of foreign countries, the study said. The study acknowledged that excess capacity due to slack domestic demand could be switched to producing exports.
Other factors, such as healthy export track records in the most seriously hit Asian economies and the fact that multinationals played a big role in their foreign trade, supported a strong export-led recovery.
But a financial liquidity crunch, the high costs of financing trade, expensive imports and the fact that Asian countries transacted the bulk of their trade with each other all undermined export prospects.
External factors could also limit Asian export growth, the study said.
North America's GDP growth would probably slow this year, implying slower import demand growth while uncertainty hangs over economic prospects of the two biggest Asian import markets, Japan and China.
Japan, which recorded sluggish import growth last year, is mired in recession, according to the latest figures, and a slump could further cut Japanese purchases of Asian goods.
Japanese imports last year grew by a meager 2.5 percent, barely higher than the 1996 level.
If the Asian financial crisis is a largely confined to the five countries in question, the repercussions "should not result in more than a small dent in global economic growth," the report said.
As slower growth in North and South America and Asia is expected to be offset partly by stronger growth in Europe, "a decrease in global trade of two to three percentage points may be expected."
"This, however, would still leave the rate of global trade expansion above the rate recorded in the first half of the 1990s."