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.