The global crisis wiped a staggering $50 trillion off the value of financial assets last year including $9.6 trillion of losses in developing Asia alone, the Asian Development Bank said Monday.
“This is by far the most serious crisis to hit the world economy since the Great Depression,” said ADB President Haruhiko Kuroda. But he predicted Asia would be “one of the first regions to emerge from it.”
A study commissioned by the Manila-based lender on the impact of the financial crisis on emerging economies estimated the value of financial assets worldwide — currency, equity and bond markets — to have dropped by $50 trillion in 2008.
It said developing Asia — losing the equivalent of just over one year’s worth of gross domestic product — was hit harder than other emerging economies because the region has expanded much more rapidly.
In Latin America, losses were estimated at $2.1 trillion. There were no comparable figures for other regions.
The former chief of the International Monetary Fund, Michel Camdessus, said radical financial reforms were needed quickly and proposed the establishment of a new global governance group composed of country representatives, the U.N. secretary general and heads of key international agencies, to define a way out of the crisis and prevent future turmoil.
He also called for a reformed IMF, with the distribution of seats to poor and emerging economies. It would be headed by a high council that would make political and strategic decisions, and have an executive board in charge of day-to-day surveillance.
“By establishing this architecture, we don’t only establish a more fair system in the world, we also re-establish confidence,” Camdessus said in a speech at the ADB conference.
According to the ADB study, the figures provide clear proof of the close connections between markets and economies around the world, leaving few, if any, countries immune to financial or economic fallout. A recovery can only now be envisaged for late 2009 or early 2010, it said.
A sprawling region, developing Asia includes 44 economies from the central Asian republics to China to the Pacific islands. The bank had earlier projected the region’s growth to slow to 5.8 percent this year from an estimated 6.9 percent last year.
The worldwide downturn has hit export-driven economies particularly hard. From South Korea to Taiwan to Singapore, exports have plunged by double digits in recent months as American and European consumers spent less on cars and gadgets.
Kuroda said Monday the impact of the crisis could result in a spike in unemployment, slower growth rates and depressed stock markets.
Tight liquidity and credit could also hit small and medium enterprises, while a drop in remittances from overseas workers, which has been fueling domestic consumption in countries like the Philippines and Indonesia, could remove important social safety nets, Kuroda said.
He said the ADB has responded by stepping up access to loans, grants and credit guarantees by several billion dollars from the originally planned $12 billion for 2009, and is asking its shareholders to increase the bank’s capital to as much as possible.- AP