Asia ex-Japan Leads the Global Recovery

In contrast, the Asia ex-Japan economies as a whole have recovered strongly and recouped all the GDP lost over the recession. Despite exports falling by a record 25% year-on-year in the first half of 2009, these economies managed to register positive, albeit moderate, growth of 3%. Domestic demand has remained firm, given the relatively strong balance sheets of households and businesses, as well as the rapid implementation of expansionary fiscal and monetary policies.

The export rebound in Asia ex-Japan was initially supported by strong intra regional demand but was later boosted by the incipient recovery in the G3. The cross-border production networks in the region, especially in electronics manufacturing, meant that intermediate inputs are shipped to multiple destinations before the final product is exported to end markets. Thus, in the same way that the decline in final demand had a multiplier effect on intra-industry regional exports, so have exports rebounded with the improvement in consumer and business confidence and the upturn in end demand.