Financial crisis slashes value of global assets

The global financial crisis slashed the value of financial assets worldwide by $50 trillion (£36 trillion) last year, the Asian Development Bank (ADB) says. Developing Asia suffered more than other emerging market regions.

The ADB study found that losses on financial assets in developing Asia in 2008 totalled $9.6 trillion. This equals just over one year’s worth of gross domestic product (GDP).

This measures the losses in equity and bond markets, including those backed by mortgages and other assets, and the depreciation of currencies against the dollar. Not included are financial derivatives such as credit default swaps that further multiplied the size of the financial markets.

Asia was hit harder than other parts of the developing world, the ADB says, because the region’s markets had expanded much more rapidly. The value of the financial assets to GDP rose to 370% in 2007 from 250% in 2003.

In Latin America estimated losses on financial assets were only $2.1 trillion, or 57% of GDP.

Haruhiko Kuroda, the president of the ADB, says this is by far the most serious crisis to hit the world economy since the Great Depression. He says while the crisis originated in America and some European countries, by now no region or country is insulated.

However, Kuroda remains confident that Asia will be one of the first regions to emerge and that it will emerge stronger than before.

The ADB’s data provides clear proof of the close connections between the stockmarkets and economies around the world, leaving few, if any, countries immune to financial or economic fallouts elsewhere, according to the bank. It adds that a recovery can only now be envisaged for late 2009 or early 2010.

However, there has been no destruction of physical and human capital, it notes. The bank says this bodes well for a strong recovery.

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