Even as the Asian Development bank dims its Asia GDP growth forecast for 2009, from 7.2 percent to 5.8 percent, Central bankers from East Asia – China, Japan and South Korea have decided to meet this weekend to discuss regional economic and financial issues. The meetings will be aimed at enhancing dialogue among the financial policymakers who feel the region needs to work cohesively to withstand impacts of the crisis.According to the China Daily, in May, East Asian finance ministers agreed to set up an US$80 billion fund to upgrade the existing currency swap scheme to fight regional financial crises, taking the region a step closer to creating a full-scale Asian monetary fund. The three east Asian countries decided to contribute 80 percent or US$64 billion to the fund which will replace the Chiang Mai Initiative – of mainly bilateral currency swaps. The remaining US$16 billion would come from ASEAN countries.
Also moving closer ASEAN countries are finalizing modalities to form an ASEAN free trade block. Leaders of 16 Asian nations met in Singapore in July this year to discuss ways in which Asian nations could enhance their “internal consolidation”. Even before the financial crisis hit Asia in mid October hilippine President Gloria Macapagal Arroyo announced Asian finance ministers had collectively agreed to set up a stand by fund to aid countries that might suffer from a liquidity crunch in the region.
The ADB forcasted growth of 5.8 percent would be the lowest since 2001 when growth was 4.6 percent. Meanwhile the World Bank slashed its forecast of East Asia – Pacific GDP growth — excluding Japan, Australia and New Zealand to 5.3 perent next year and 6.5 percent in 2010, following estimated growth of 7 percent this year.
“Challenges facing the East Asian economies have multiplied during the course of 2008, spelling hard times in 2009,” the Washington-based organization said, noting the drop-off in import demand in the world’s major economies and a big decline in commodities prices.
Asian nations have already announced that exports have dropped to 2001 levels. While all Asian nations are expected to feel the downturn, key Asian economies Hong Kong, South Korea, Singapore and Taiwan would feel it the most. Trade-dependent Singapore and Hong Kong have already fallen into recession during the last quarter, while South Korea and Taiwan are taking aggressive steps including drastically reducing interest rates to shore up their economies.
