SINGAPORE -- At the end of last year, the IMF projected world economic growth for 2009 to be at three percent, with a slightly higher level for the Asia-Pacific region at five percent. China and India were expected to help shoulder the world's burdens as they are the only economies projected to record over five percent growth rates. Expectations were high that these would be able to help offset the global economic crisis and help lift the world economy.

 

According to Frost & Sullivan's Senior Industry Analyst of Chemicals, Material and Food Practice, Sheila Senathirajah, with the first half of 2009 almost over, the true impact of the financial crisis has become much clearer. There were unprecedented contraction levels in activity and trade, which slowed down the mature and emerging economies even more than initially projected. In its April 2009 publication, the IMF revised its initial projected 2009 growth rates to even grimmer levels. Global activity is expected to decline by 1.3 percent and growth in Asia Pacific is expected to be only 1.1 percent.

 

"In the paint and coatings industry, like all other leading industries impacted by the economic crisis, the situation is similar. At the beginning of the year, most industry leaders were unable to accurately quantify how badly the market in Asia Pacific would be affected. Then, projected growth for 2009 was expected to be approximately five percent, closely pegged to economic growth levels of the region at that point in time," said Senathirajah.

 

"However, in recent interviews with key industry players we find that, based on poor activity levels in the first half of the year, projections have now been dropped to three percent. The forecast for the coatings market growth in China and India have also been cut from double-digit numbers to between eight and nine percent," said Senathirajah.

 

The paint and coatings market is greatly influenced by the end-use industries it serves, such as automotive, building and construction, shipping, white goods, and wooden furniture. According to Senathirajah, all these industries have been hit badly by the recession and most production plants have had to shutdown or cut back on activity due to a major drop in production volumes.

 

"The drop in the housing market is expected to reduce the decorative coatings market by 20-30 percent. In the automotive industry, the two key production hubs, Japan and South Korea, are suffering badly from a drop in exports, which has led to the closure of plants and relocation to countries with cheaper labor costs. Elsewhere in the region, sales have plummeted by 25-50 percent. In order to bolster the flailing industry, some governments are putting tax cuts in place to lift the local market, as in South Korea," Senathirajah said.

 

For industry players, cost cutting is eminent in times of an economic crisis. But while major product launches or market-entry strategies are held back, companies are still willing to invest in research and development.

 

"Companies are now seen to be actively preparing for an upturn in the industry, which is expected in 2010. They will continue to invest in new product development and also new capacity where appropriate. Companies are confident this will enable them to emerge stronger than their competition once the crisis is over.

 

"Within the paint and coatings industry, a lot of focus is being placed on environmental products and environmental issues for the region. We expect to see more 'green' products coming into the market. The methods in which paints are manufactured are also expected to see changes as companies become more aware of waste, recycling and emission levels," said Senathirajah.

 

Overall, the Asia-Pacific paint and coatings industry is expected to record only marginal growth for 2009. Industry players continue to be hopeful that 2010 will bring the industry back to more acceptable levels.