How Recession in the Asian Economies Negatively Impacts the Poverty Situation

Abstract

While the progress of the East Asian and South-East Asian economies was more or less undisturbed during the 1980s and the 1990s and tended almost linearly to reduce poverty levels, a sudden cataclysm gripped these economies and, in particular, the East Asian Economies of the ASEAN countries, Korea and Japan, and sent these economies spiralling downwards into a deep recession. Many macro and micro variables showed a sudden decline and the fundamentals of these economies suffered quite seriously from their negative impact. Even China could not be excluded from a decline in some of the fundamentals though many other variables remained steady in their magnitude. The Far Eastern shock had unfavourable consequences on the economies of South Asia though the damage was somewhat limited, as in the case of India. But the negative impact of the crisis spread far beyond South Asia and reached even the United States, Western Europe and Australia. There was a slow-down in the exports of these countries to the South-East Asian markets owing to a decline in the purchasing power of the latter. The export capabilities of South-East Asian countries were also reduced considerably owing to a decline in their production and a disorientation of their banking mechanism, and this caused a serious fall in the two-way trade between the East and the West. Though a full evaluation of the impact of declining fundamentals in the Far East has not yet been calculated, it is obvious that the continuing and deepening recession there has worsened the poverty situation and transferred millions of people from the zone of affluence to the zone of poverty.