SINGAPORE/BEIJING -- Singapore's finance minister yesterday said a
global recession looked more likely than not and a Chinese official
acknowledged China's growth may slow to a 10-year low, highlighting
Asia's rising concern over its exposure to US and European risks.
If Europe's debt troubles deepen or the United States slips into another
recession, Asia's export-driven economies would be vulnerable through
both trade and investment channels. Economists have already begun
marking down growth forecasts while stocks have fallen across the region.
Japanese, Chinese and South Korean financial regulators discussed the
global threats in a conference call yesterday, Japan's financial
services minister told a news conference.
"Asia will not be immune to a global slowdown," said Tharman
Shanmugaratnam, Singapore's finance minister. "We are already at stall
speed in the US and Europe, which means we are now more likely than not
to see a recession."
Singapore, one of the world's biggest trade hubs, is heavily exposed to
global trade cycles and its economy contracted in the second quarter,
compared with the prior three months. Some economists predict another
contraction in the July-to-September period, which would fit the
commonly used recession benchmark of back-to-back negative quarters.
Mr. Tharman's prognosis was gloomier than those of most US and European
officials, who still see the global economy escaping another recession.
World Bank President Robert Zoellick, speaking in Singapore at the same
conference as Mr. Tharman, said another recession was unlikely although
the risks were high.
But a surprisingly weak US August employment report and mounting worries
about European sovereign debt sustainability have heightened concerns of
a downturn.
US stock markets were expected to sell off when they reopened on Tuesday
after a three-day holiday weekend. European shares fell sharply on Monday.
With growth constrained in most advanced economies, investors are
looking to emerging markets to pick up the slack. But growth is already
slowing in countries such as China, and with inflation stubbornly high,
policymakers are not inclined to provide much of an artificial boost.
Huang Guobo, the chief economist at China's currency regulator, said
growth may ease to below 9% in 2012, but fighting inflation remained the
top policy priority.
"The weakening global demand for Chinese exports will be a challenge,"
Mr. Huang said. "Next year, if the situation continues, China's growth
rate may fall below 9%."
Many private economists have already cut their 2012 growth forecasts for
China, so a sub-9% reading next year would not come as a big surprise.
However, it would mark a significant slowdown. China, the world's second
biggest economy, managed to sustain growth of more than 9% even during
the depths of the global financial crisis in 2008 and 2009.
China expects growth to average 7% over the next five years, so slipping
below 9% in 2012 would not be a policy disaster. In fact, it might help
to contain inflation, which hit a three-year high of 6.5% in July.
Data due on Friday is expected to show it moderated a bit in August,
although it is almost certain to remain far above China's annual target
of 4%.
Asia's advanced economies were also wary of global repercussions.
Australia's central bank held interest rates unchanged yesterday, as
expected, but said the outlook for the global economy was less clear.
Central banks in Japan, South Korea, Indonesia, Malaysia and the
Philippines hold policy-setting meetings later this week. -- Reuters
Economies need to focus on hiking domestic consumption, investment
Asia-Pacific countries should focus on increasing domestic investment
and consumption as global risks have increased, the central bank chief
and an economist of a United Nations agency yesterday said.
"Global economic activity has weakened and become more uneven and
downside risks are growing," Bangko Sentral ng Pilipinas
(BSP) Governor Amando M. Tetangco, Jr. said in a keynote speech at a
forum on lessons learned from the 2008 global crisis.
The growth of advanced economies is being hindered, he said, while
emerging economies are showing resiliency. A continued reliance on trade
with developed countries, however, was seen as a vulnerability.
"The main channel in which Asia will be affected will likely be via
trade, with more open and export-driven economies likely to be more
vulnerable," Mr. Tetangco said.
Nagesh Kumar, an economist at the UN Economic and Social Commission for
Asia and the Pacific (UNESCAP), concurred. The challenge, he noted, "is
to boost demand in the region to complement sluggish demand in developed
countries."
The policy issue for the region, said Mr. Tetangco, is how to "increase
domestic investment and consumption so that there would be multiple
planks for sustaining growth".
Mr. Kumar said this could be achieved by focusing on agriculture
productivity, rural development, the construction of basic services and
infrastructure, and social protection.
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