Recession a “short one”

Asia – The global recession will be painful, but it will be a short one, predicts DPWN CEO Frank Appel.

Appel says the global downturn, albeit more serious than the world has ever seen, will be a temporary one, with trade between Asia and the west heading north again in 2010.

"We are positive that the recession is going to be short, and we are positive to see a recovery, sooner than later," Appel says.

He believes the recession will not be a protracted one because of the nature of the recession. The global economy took a sudden nosedive with consumer confidence plummeting along with the banks. In the same vein, consumers will start spending again "at the first sign that the economy is recovering", he says.

Appel was speaking to journalist during the launch of Fuelling Global Trade: How GDP growth and oil prices affect international trade flows, a study done by the Economist Intelligence Unit (EIU) and commissioned by DHL.

The study, based on a five-year forecast, found that Asia trade with the west was likely to get a boost more from rising incomes than the health of the western economy.

"Much of Asia has grown up on the back of vibrant trade with the West. But with the economies of North America and Europe forecast to perform poorly in 2009, the impact on Asia's trade-dependent economies could be serious indeed," says Justin Wood, a director a the EIU.

According to the study results, the link between income and trade is stronger between Asia and the west than between North America and Europe, where a 1% combined increase in income between an Asian country and a western country would deliver 1.36% increase in trade while a similar rise in income between two western countries will deliver only a 1.14% increase in trade. 

The EIU also predicts that even though the price of oil has dipped from its US$140 peak in July, oil prices are likely to go up again after the economic storm passes.

Rising oil prices will in turn have significant impact on Asia manufacturing, as transport costs will make up a larger share of the final cost of low-value goods than they do for high-value goods.

"Asia manufacturers need to move up the value chain because high-value goods offer more protection," Wood says.