Global financial market losses reach $50
trillion; emerging markets in developing Asia worst hit
- Study
MANILA, PHILIPPINES - The global financial crisis slashed
the value of financial assets worldwide by a massive
$50 trillion last year, with developing Asia suffering
more than other emerging market regions.
According to a new study commissioned by the Asian Development
Bank (ADB) entitled Global Financial Turmoil and Emerging
Market Economies: Major Contagion and a Shocking Loss
of Wealth?, losses on financial assets in developing
Asia in 2008 totaled $9.6 trillion, or just over one
year’s worth of gross domestic product (GDP).
Asia was hit harder than other parts of the developing
world because the region’s markets have expanded
much more rapidly. The value of financial assets to
GDP rose to 370% of GDP in developing Asia in 2007 from
250% of GDP in 2003. In Latin America, the ratio only
rose by 30%, with the result that estimated losses on
financial assets were a much lower $2.1 trillion, or
57% of GDP.
“This is by far the most serious crisis to hit
the world economy since the Great Depression. While
this crisis originated in the US and some European countries,
by now no region or country is insulated. I am afraid
things may get worse before they get better. However,
I remain confident that Asia will be one of the first
regions to emerge from it, and it will emerge stronger
than ever before,” says ADB President Haruhiko
Kuroda.
The ADB estimates measure the losses in equity and bond
markets, including those backed by mortgages and other
assets, and the depreciation of many currencies against
the U.S. dollar. Not included are financial derivatives
such as credit default swaps that further multiplied
the size of the financial markets.
The data provide clear proof of the close connections
between the markets and the economies around the world,
leaving few, if any, countries immune to financial or
economic fallouts elsewhere. A recovery can only now
be envisaged for late 2009 or early 2010, according
to the study.
“Most emerging market economies, including in developing
Asia and Latin America are at a crossroads, and the
next 12 to 18 months will be very difficult,” the
study says. “However, there has been no destruction
of physical and human capital, boding well for a strong
recovery, possibly more cautious and sustainable, after
the adjustments in the financial markets are worked
through over the next year or so.”
ADB President Haruhiko Kuroda and other experts on Monday
began discussing the study at the ‘South Asia Forum
on Impact of the Global Economic and Financial Crisis’,
a two-day conference being held at ADB headquarters
in Manila.
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