Pacific will not escape global downturn, says ANZ CEO

ANZ boss Mike Smith says the Pacific is already feeling the effects of recession. Photo / Dean Purcell

APIA- The Pacific will not escape the impacts of the global financial downturn despite its isolation from major international markets, according to a banking chief.

Chief executive of ANZ Bank Worldwide Mike Smith, who is in Samoa this week, said the Pacific is already starting to feel the impacts of recession.

"Clearly the Pacific will not escape the global downturn, and the first impacts of the global downturn have already been felt. There have been a large drop in the price of commodities, the price of copper for example, and gas and minerals fallen," Smith said.

Since the downturn worldwide, the World Bank and the Asia Development Bank insisted initially that the Pacific will be spared from the crisis due to its isolation.

"Well, certainly, you do not actually notice the impacts of the global meltdown in the Pacific, but that is probably quite understandable, because the problem started in the US and went east, and really we are the last place to be affected," Smith said.

ANZ Bank, which claims to have a 40 per cent share of the Pacific banking sector, says that in the middle of the Pacific it is very hard to fully understand the seriousness of the financial situation in the United States and in Europe.

"We actually live in a global economy, and nobody is immune from this crisis, no one person is going to be immune from this crisis. Today if there is a crisis in Wall Street then the impact is going to be felt here in Apia, that is the way the world is today," Smith said.

The CEO, who arrived with an entourage of ANZ Executives from its Melbourne Headquarters, said that Samoa may be spared from being severely impacted if foreign aid from Australia and New Zealand remain unchanged.

"Many Pacific countries are recipients of foreign aid, while it is possible that this foreign aid will be affected as these donor countries experience domestic difficulties, the historical evidence indicate that foreign aid is largely driven by non economic factors, so I am optimistic that we will not see a sharp fall in aid flows," Smith said.

So far, Australia's aid budget to Samoa has increased, as well as New Zealand's.

According to Smith, the harshest impact of the financial crisis will be through remittances.

"Many of the Pacific countries are recipient of remittances from Australia, New Zealand and elsewhere, and I know that remittances are a very important source of income to the community. It is likely that it will slow and starting to happen as unemployment increases in developed economies, but this is difficult to predict."

Smith says that it will be a tough year for the Pacific, however with its proximity to Asia, Australia and New Zealand the Pacific will emerge from this crisis in "reasonable shape".