SE Asian financial crisis to knock global growth
SE Asian financial crisis to knock global growth
LONDON (Reuters): Financial upheaval in Southeast Asia will
take its toll on the global economy but the brunt of the impact
will be limited to that region, analysts said yesterday.
Japan, beset by economic woes of its own, and Australia, a
major exporter to the area, will find their economies under
pressure.
Further afield, slowing Asian growth could help restrain
inflation -- and interest rate rises -- in Europe and the United
States.
"We're going to see much slower growth than most people are
forecasting for Southeast Asia and this has not been incorporated
yet into forecasts," said Stephen Lewis, chief economist at
London Bond Broking here.
"When markets begin to focus on how damaging the financial
turmoil there is likely to be, they will take a much more somber
view of global prospects for 1998," he said.
Analysts said higher interest rates and stock and currency
turmoil in Hong Kong, Thailand, the Philippines, Indonesia and
Malaysia will cut consumer demand, investment and exports across
the region. Commodity prices could also be dragged lower.
Hong Kong became the latest casualty this week. Its stock
market has tumbled 23.3 percent since Monday as interest rates
soared and authorities vowed to defend the Hong Kong dollar peg
to the U.S. currency.
Hong Kong authorities rejected joining other countries in the
region that have devalued to maintain their competitiveness.
Initial forecasts are still being adjusted but analysts said
the slowdown in Southeast Asia could chop as much as 1.0 percent
off global growth.
Robin Marshall, chief economist at Chase in London, said the
obvious casualties were Japan and Australia.
"Globalization has been unfolding on a regional basis," he
said. "You're getting increasingly integrated regional
economies."
He said the Asian region was the target for around 44 percent
of Japan's exports last year.
"That gives you a very obvious exposure in Japan," he said. He
expected the Southeast Asian slowdown to cut Japanese growth by
around 0.25 to 0.50 percent in the next 12 months.
Marshall said Japan is in a much weaker position to withstand
the currency crisis in Asia than the United States was when faced
with the Mexican peso crisis of December 1994.
"This is appalling timing for the Japanese authorities," he
said.
"Even in Europe and the United States there is going to be
some knock-on deflationary effect from the contraction in demand
for exports," he added. "Germany actually exports a lot of
capital goods to the region."
Francesco Giordano, economist at Credit Suisse First Boston in
London, said although Southeast Asian economies may feel the
pain, the slowdown could be well timed for the Unites States,
taking the heat out of the economy just as inflation risks
frothing higher.
"Inflation goes down but growth stays at a reasonable pace,"
he said.
Credit Suisse First Boston expects the Asian turmoil to
depress global growth by around 0.65 percent in 1997 and 1998.