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TOKYO: Asia’s economies are set to lose some steam in 2008 as the
US economic locomotive slows, but continued breakneck growth in
China should ensure the region escapes a severe downturn, analysts
predict.
Japan looks particularly vulnerable to any
cooling of the US economy as brisk exports have played a pivotal
role in a recovery in Asia’s largest economy after a slump
stretching back over a decade, they said.
But overall the region is expected to remain
relatively resilient to the ongoing fallout from a US housing slump
and related credit squeeze.
“Growth will likely moderate somewhat from
what has been a very strong performance this year across most of
Asia,” said David Cohen, director of Asian economic forecasting at
Action Economics in Singapore.
The extent of the slowdown will depend on
whether the US economy makes a hard or a soft landing, analysts
said.
“Asia ex-Japan is well placed to weather a
moderate global economic slowdown, but not a sharp downturn,”
Lehman Brothers economist Rob Subbaraman wrote in a research note.
As well as an expected US slowdown, high oil
prices and a possible dollar slump are seen as the main potential
threats to the region.
But analysts said Asia is in better shape to
cope with external shocks than a decade ago when the regional
financial crisis struck because countries now have current account
surpluses and huge foreign exchange reserves.
Despite its resilience so far to signs of a US
slowdown, analysts say Asia’s fortunes are still closely tied to
the United States.
“If there is a hard landing, we doubt that the
region could decouple; China could even face deflation,” said
Subbaraman.
Asian economies still rely heavily on the United
States to buy the goods churned out by their myriad factories.
“The exposure of Asian economies to the US and
other major industrialized economies has increased not decreased
over the last couple of years,” said Jan Friederich, a senior
economist at the Economist Intelligence Unit in Hong Kong.
But he said the fast-growing Chinese and Indian
economies might benefit from a moderation in growth amid concerns
about overheating.
“China is probably growing a bit fast at the
moment. India is probably also still somewhat on the verge of
overheating,” he said.
Slowing demand for their exports would help to
rein in growth to more sustainable levels, said Friederich.
According to the Asian Development Bank, Chinese
economic growth will ease to 10.5 percent in 2008 from 11.4 percent
in 2007 “if government measures to cool the economy begin to take
hold.”
China’s economy continues to power ahead
despite government efforts to rein in growth, with a recent emphasis
on directly ordering banks to curb lending.
Growth in the Southeast Asia economies is
expected to cool to 6.1 percent in 2008 from 6.3 percent in 2007,
the ADB predicts.
Japan looks set to be one of the weakest
performers again in Asia next year, particularly if exports to the
US slow, analysts said.
Morgan Stanley economist Takehiro Sato warned
Japan was even likely to suffer a “mild recession” in 2008.
“Coming on top of high energy prices, the
fallout from the subprime crisis and errant policies will likely
cause economic activity to stagnate,” he wrote in a research note.
Inflation has also taken longer than expected to
return in Japan after years of deflation, with consumers reluctant
to splurge as companies continue to award only meager pay rises
despite bumper profits.
A shrinking population also poses a major
challenge. ”The Japanese are swimming against the current. The
demographics are just not favorable for their domestic growth,”
said Cohen at Action Economics, who sees Japan’s economic growth
holding steady at 1.8 percent next year.
-- AFP
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