Ailing Asia faces prolonged slump after U.S. attacks
Ailing Asia faces prolonged slump after U.S. attacks
SINGAPORE (AFP): Asia's troubled economies, already hammered by the global slowdown, now face the prospect of a prolonged slump in the wake of the terrorist attacks in the United States, economists said Tuesday.
The attacks have slowed world trade to a crawl and for the export-led Asian economies who depend heavily on the US market, the prognosis is grim.
Singapore and Taiwan are already in recession, Hong Kong is dangerously close, and Thailand and Malaysia have barely escaped.
"This is going to worsen the situation. The global economy will sink as a result," Chia Woon Khien, a regional economist at Anglo-Dutch bank ING Barings, told AFP.
"What happening on the US is a negative sum game. For Asia, the impact would be worse. The likelihood is there of a prolonged recession," she said.
Prior to the attacks, there was cautious optimism the region could squeeze out a modest recovery in the first half of 2002 but such hopes have evaporated.
"For the next 100 days when the US economy is in a mourning period, we think that spending and investment decisions will be put on hold," said GK Goh brokerage regional economist Song Seng Wun, who now sees a regional recovery in the latter half of 2002.
The lead-up to Christmas and New Year is traditionally a crucial period for Asia, particularly for the key electronics sector.
Economists said the timing could not have been worse for a region which was hit less than three years ago by the 1997-98 financial crisis.
Unlike that crisis, when the booming US economy was the white knight for Asia, there is little the region can do this time round to stem the downturn except to ride it out, economists said.
Even economic stimulus packages to boost domestic demand would not make up for the slack in foreign trade, economists said.
"Demand from the US will shrink due to a contraction in consumer spending and domestic investment in the wake of the attacks," said Norman Yin, a professor at Taiwan's National Chengchi University.
In Malaysia, the government is now considering further stimulus measures on top of the 789 million US dollar supplementary budget in March and will again slash 2001 growth forecasts -- now at 5-6 percent -- for the second time next month.
The Malaysian Institute of Economic Research predicted the economy will contract in the third quarter and said it would lower its growth forecast of 2.0 percent this year. But it was confident there will be no recession.
Hong Kong authorities also admitted the territory will not be able to escape the fallout.
Financial secretary Antony Leung said "because the American consumers are still a bit anxious, it would put pressure on the American economy and thereby the Hong Kong economy."
Thailand, which narrowly avoided a recession in the second quarter, has cut full year growth forecasts to 1.5-2.0 percent from 2.0-3.0 percent after the attacks.
Indonesia is however maintaining its growth forecast of 3.5 percent for the year, with the government saying it was too early to predict the impact of the fallout from the attacks.
In Cambodia, the economic consequences are grim. The country relies on handouts for economic survival which will total about 620 million dollars for the year to June 2002.
"Foreign aid will fall as will the tourism dollars, and this country is already on the slippery slope," a Western commercial banker told AFP.
In Southeast Asia's fastest growing economy Vietnam, the expected fall in export demand is thought unlikely to spark a recession, given the low economic base, but it would dent the authorities' ambitious growth plans.
Even before the attacks, the government's 7.5 percent growth target for the year was seen as unreachable -- analysts' projections range between four and 5.5 percent.
China and India are expected to continue growing comfortably this year but neither of the two giants will be spared from the aftershocks of the attacks on US soil.
The negative impact of the US crisis on China will be limited because the government will continue to boost domestic demand, Great Wall Securities analyst Johnson Liu said of the Chinese economy.