As recently as February, some economists were confident that much of Asia — in particular China and India — would be able to avoid a deep recession even amid the current breakdown of the global financial system and the resultant collapse of international trade and investment. A rosy picture was painted of a region that would fare much better than during the 1997 Asian financial crisis.

We now know that these expectations were way off, and that Asia is suffering even more today than it did in 1997. The speed and ferocity of the region's economic downturn have shocked even pessimists.

The International Monetary Fund projects a 2009 decline of gross domestic product in Asia by at least 2.5 percent, a dramatic contrast to the 9 percent growth in 2007. In contrast, IMF data show that even during the peak of the 1997 financial crisis, Asia continued to grow by around 3.7 percent.

We need to discard the rosy picture and address explicitly the potentially game-changing impact of the crisis. An important characteristic of the current crisis is that the more export-oriented a country is, the more vulnerable it is. In fact, the most successful countries, such as China, Taiwan, Korea and Singapore, are suffering the most in terms of falling exports and imports, industrial production and investment, as well as in terms of rising unemployment.

In February, Korean exports dropped as much as 26 percent from a year ago and imports plunged 40 percent. In Taiwan, another prime example of Asia's export-oriented "global factory" model, exports declined by 42 percent in January compared with the same month in 2008, the second straight month of steep decline.

And what about China, whose rise as the dominant global factory has catapulted it over the past few years into the exclusive club of global economic powers? Recent trade data show that Chinese exports have suffered the biggest slide in a decade — 26 percent in February — while its imports fell almost 24 percent.

Of particular concern to the Chinese government is rising unemployment among migrant workers and university graduates. The government estimates that 20 million migrant workers lost their jobs or were unable to find employment in 2008, and the picture may grow worse in 2009. China's Academy of Social Sciences reports that 7.8 million graduates will search for jobs this year. Of these, up to 40 percent — around 3 million — will not find jobs. Pieter Bottelier, a respected China expert, projects that, overall, 48 million Chinese may be looking for jobs this year, while fewer than 7 million new jobs are likely to be created.

How deep and persistent will Asia's downturn be? If the world economy will take years and not months to recover, which I think it will, it follows that profound adjustments may well be necessary in Asia's export-oriented development model.

Take China. Driven by a rapidly expanding global economy, its dependence on international trade has doubled since 1998, from 30 percent of GDP to as high as 60 percent in 2008. But this year, both trade and investment are falling off the cliff. Coping with these fundamental external disruptions will require profound adjustments.

For Asia, the real question is: Will governments be able to use the crisis as a broad catalyst for change? There is much talk that Asia needs to upgrade its economies through innovation. Such a shift in strategy is necessary to address the region's vast needs in food, shelter, medical services and infrastructure, and to counter its environmental degradation.

But as of now, Asia is still ill-prepared to mobilize resources for economic recovery. As a share of GDP, the stimulus packages announced in much of Asia are considerably smaller than in the U.S. and Japan (6 percent) and Germany (3 percent) — with two exceptions: Singapore (3.2 percent) and China (7.1 percent). What sets China apart from its Asian neighbors is that high fiscal reserves and a very low level of debt provide ample resources to continue priming the economy.

Yet even for China, the barriers remain stacked high against an early recovery. For instance, the freefall in global demand, combined with widespread excess capacity, is giving rise to price deflation and reduced wages, which in turn will constrain China's own consumption. It will also lead to depreciation in China's currency exchange rate relative to countries with a less flexible labor market, which includes the U.S.

The scariest prospect is that this is likely to prompt governments worldwide to move toward more protectionist policies, possibly igniting trade wars with global ramifications. Let's hope that Asia's leaders recognize the urgent need for new strategies before that disturbing scenario comes to pass.

Reach Dieter Ernst at (Unknown address).

Dieter Ernst,a senior fellow in economics at the East-West Center in Honolulu, wrote this commentary for The Advertiser. Reach him at ErnstD@ EastWestCenter.org.