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."
