Asia in danger of slipping into a recession: UBS Warburg

Asia in danger of slipping into a recession: UBS Warburg

SINGAPORE (AFP): Some Asian countries have a high risk of slipping into a recession because of the fragility of the Japanese economy, investment bank UBS Warburg said Tuesday.

UBS Warburg's London-based chief economist George Magnus told a briefing the prospects of a recovery in Asia are not yet fully formed.

"I think we still are on a cusp of a recession. I think it's still very possible that it can happen in one or more countries," he said.

Japan was already heading for a technical recession after having posted a 0.2 percent contraction in gross domestic product (GDP) in the quarter to March.

It was a certainty the world's second biggest economy would post negative growth in the current quarter ending June, he said.

"From a technical point of view, Japan is certainly already there," Magnus said. A technical recession refers to two consecutive quarters of negative growth.

He however remained hopeful that Asian policy makers would "do the right thing at the right time" to avert a recession and allow the economies the "time to build its legs" for a sustained recovery.

Magnus' projections for regional currencies were similarly grim.

The yen was likely to slip against the dollar and this would add pressure on other Asian currencies as countries sought to protect their export competitiveness.

"Asian currencies will fall almost certainly. The real stuff is where the direct competitive threat is," said Magnus.

It would be especially evident in Taiwan and South Korea where they compete with Japan in similar export markets.

He said the Japanese currency would likely fall to 130 yen against the dollar by September and 130-140 by year-end. The yen has traded between 123-124 against the greenback this week.