Asia's recovery intact despite oil price, China slowdown: economists
Asia's recovery intact despite oil price, China slowdown: economists
Eileen Ng
Agence France-Presse
Kuala Lumpur
Soaring oil prices and a slowdown in China's economy are a
double-whammy for Asian countries but will not plunge the region
into a recession or derail economic recovery, economists said on
Tuesday.
Crude oil prices are expected to ease after approaching US$45
a barrel and a softlanding for China's economy appears intact,
they told a two-day Asian economic summit here.
But regional countries must accelerate structural reforms to
bolster domestic demand and pursue closer regional integration to
sustain broad-based growth and benefit from the rise of China and
India as Asia's new economic powerhouses, they said.
Singapore-based DBS Bank vice president and regional economist
Chua Hak Bin said oil prices were expected to moderate amid signs
of a consumption slowdown in the U.S. and China.
He said oil prices at around $40 a barrel could shave off 0.6-
0.8 percentage points from Asia's gross domestic product (GDP)
growth in 2005, and up to 1.5 percent if prices were at 50 a
barrel.
"It is going to hurt but it is not like the oil shock episodes
in the 1970s and 80s. It is not going to derail Asia's recovery.
We believe prices will come down slightly from where they are
now," he said.
MasterCard Int. regional economic adviser Yuwa Hedrik-Wong
said oil prices were experiencing a "temporary short-term spike"
and would likely average around $34 a barrel this year and ease
to $32-$33 next year.
He said the global economy was becoming more energy efficient
and could absorb the increase.
Despite uncertainties, he said the world economy was
undergoing its "first synchronized global upswing in 15 years"
with Asia-Pacific emerging as a high-performance economic region
and showing its best fundamentals since 1990.
Malaysian Prime Minister Abdullah Ahmad Badawi, in his keynote
address late on Monday, said Asia was expected to grow more than
7 percent this year but the region was not yet "bullet-proof" and
important policy work was needed to boost its resilience.
He cited risks from a possible sharp slowdown in China, a
cooling of the global economy and global monetary tightening, and
urged Asian nations to push ahead with structural reforms, cut
public debts and strengthen regional economic cooperation.
DBS's Chua said China's boom has boosted intra-regional trade
and a cooling of the economy could cut two to three percent off
Asia's export growth but "it is not going to send the rest of the
region into recession."
"The slowdown is really on the investment side, and limited to
targeted sectors. The question is whether the Chinese will
introduce more (cooling) measures. I guess it's a balancing act
but so far, it looks like soft landing is the most likely
scenario," he added.
He said China could restore its 19th century dominance when it
accounted for nearly one-third of global GDP share if it pursued
global integration, remained open to technology and did not
engage in war.
The Asian Development Bank projected annual GDP growth of
China, India and the 10-member Association of Southeast Asian
Nations (ASEAN) to average nine, eight and 6 percent respectively
from now until 2015, said assistant chief economist Yao Xianbin.
By 2015, China's GDP is expected to soar to $3,963 billion
from 1,409 billion last year, India to 1,518 billion from 603
billion, and ASEAN to 1,346 billion from 669 billion, he said.
While Asia has shown resilience after the 1997-1998 regional
financial crisis, Yao said progress in bank restructuring had
been slow and uneven, domestic investment remained weak, and per
capita incomes in developing countries were still significantly
low.
"Countries need to accelerate policy reforms and economic
restructuring and pursue closer policy cooperation region-wide to
maintain broad-based growth," he added.