ASEAN Services sector and the growth rebalancing model

Abstract

Initially, many economists expected that Asia would be spared from the ill effects of the crisis due to its limited exposure to the subprime market However, as the crisis impinged on global demand, growth in the East Asian region fell dramatically to 6.3 percent in 2008 from an impressive 9.6 percent in 2007 (ADB 2009a). For the ASEAN 4 countries (Indonesia, Malaysia, Philippines, and Thailand), growth rate fell to 4.8 percent in 2008 from 6.3 percent in ,2007 while for the newly industrialized economies of Hong Kong , South Korea, Singapore, and Taiwan; combined growth rates dropped sharply to 1.8 percent in 2008 from 5.6 percent in 2007. In China, GDP growth was nine percent, the lowest rate registered since mid-2003. With the region's high degree of openness, the recession in the US, Europe and Japan brought a precipitous drop in exports. This hit at the heart of Asia's economies, thus, seriously affecting the region's growth prospects. Emerging Asia's' exports fell by almost 23 percent while industrial production plunged by 17%. World trade is expected to contract by nine percent in 2009, the first drop in 25 years. ADB forecasts show a 3.6 percent growth in ASEAN 53, three percent in Emerging Asia, seven percent in China and -3.3 percent in the newly industrialized economies of HK, Korea, Singapore and Taiwan.