Asia could kick off global meltdown: Economists<\/p>\n
SINGAPORE (Reuters): Asia's economic crises could result in a
\nglobal recession as early as next year if Japan does not recover,
\neconomists at the East Asia Economic Summit said on Monday.<\/p>\n
They said that while Asia's fundamentals were strong -- stable
\nmacro-economics, emphasis on skill upgrading, strong
\ninfrastructure and high savings rates -- the region's recovery
\nwas locked to Japan's.<\/p>\n
\"We are at a critical juncture,\" Kenneth Courtis, chief
\neconomist and strategist at Deutsche Bank Group Asia Pacific,
\nJapan told the summit conference, sponsored by the Geneva-based
\nWorld Economic Forum (WEF).<\/p>\n
\"In sector after sector, we have major problems brewing...All
\nsectors have excess supplies,\" Courtis said.<\/p>\n
\"I think the biggest risk is Japan. If it doesn't get its act
\ntogether, Japan will become the Titanic that pulls the rest of
\nAsia along with it,\" Courtis said.<\/p>\n
Courtis said as the world's second largest economy, an ailing
\nJapan which was contracting at a three to four percent rate could
\nresult in a global meltdown.<\/p>\n
\"It is the world's leading savings nation, the world's biggest
\ncreditor. If it goes into financial implosion then it becomes
\nvery difficult to see how we can avoid a global meltdown,\"
\nCourtis said.<\/p>\n
\"There is no way to stabilize Asia without stabilizing Japan
\nand there's no way to stabilize the world's economy without
\nstabilizing Asia,\" he said.<\/p>\n
In order to stabilize Japan, especially its beleaguered
\nbanking sector, the government needed to recapitalize all its
\nbanks, ailing or otherwise, immediately, Richard Koo, chief
\neconomist at Japan's Nomura Research Institute said.<\/p>\n
Koo said the Japanese government did not have the time to
\nselect the good or the bad banks for recapitalizing as this would
\ntake up to five years, and the economy did not have that much
\ntime.<\/p>\n
Some officials felt Asia's high savings rate and export-led
\ngrowth focus could be detrimental in the face of a global
\neconomic slowdown, notably in the United States.<\/p>\n
\"Every country is focussing on an export-led growth except
\none. That is the United States who's buying,\" Clyde Prestowitz,
\nPresident of the Economic Strategy Institute in the United States
\ntold the conference.<\/p>\n
\"We need demand consumption apart from the United States,\" he
\nsaid.<\/p>\n
Prestowitz said if Japan remained ill, Asia recession worsens,
\nthe U.S. stock market falls and U.S. consumption declined, a
\nglobal recession could hit as early as next year.<\/p>\n
\"The only way to pre-empt that pressure (for a global
\nmeltdown) is to get growth in the global economy and that's going
\nto take about six months to get the machine going again,\" Courtis
\nsaid.<\/p>\n
Ulrich Cartellieri, a board member of Deutscje Bank told the
\nmeeting that Asian countries must move faster to restructure
\ntheir financial systems because there is a now a risk of the
\nregion's crisis spilling over into the rest of the world.<\/p>\n
\"Financial restructuring is a battle against time and in this
\nbattle, there are only two types of soldiers, the quick and the
\ndead,\" Cartellieri added.<\/p>\n
\"Unfortunately, the risk now is that the external environment
\nwill deteriorate,\" he said. \"Against this scenario the urgency to
\nget on with financial restructuring becomes even greater.\"<\/p>\n
Cartellieri said the speed at which crisis-hit Asian countries
\nwere restructuring their debt was \"disappointing\" and in fact,
\ntheir total debt had increased since the end of last year.<\/p>",
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