HSBC said this slide will be led by Hong Kong, Korea, Taiwan and Singapore, while countries like China and India will be the main supports of growth.

Falling demand from most developed nations in the wake of the global downturn has hit economic growth in Asia. But observers said domestic factors are also contributing to the slowdown.

Robert Prior-Wandesforde, senior Asian economist, HSBC, said: “The other factor is domestic demand, in particular consumer spending and investment. Actually, the domestic demand in Singapore and rest of Asia slowed before exports. Over here, initially at least, it was due to the huge commodity price shock that we had a few months ago.”

HSBC said it sees little upside in the near future, but it is taking comfort in the massively synchronised and powerful fiscal and monetary policies Asian economies are adopting, and also in falling commodity prices which are seeing the largest declines in 50 years.

Of all Asian countries, Singapore’s open, export-dependent economy is expected to fare the worst. But it is also expected to bounce back the fastest and strongest.

“After a fall of nearly 3 per cent on average this year, I think that GDP could rise more than 5 per cent in 2010. That’s the kind of recoveries Singapore often gets. Sharp downturns followed by sharp upturns,” said Mr Prior-Wandesforde.

Speaking at a media conference on the bank’s outlook for Asia on Tuesday, he said he expects Singapore’s economy to bottom out in the first quarter, with a GDP contraction of 7 per cent on-year – the largest since the mid-1970s.

Overall, he expects Singapore to round up the year with a 2.8 per cent contraction.

Source : Channel NewsAsia – 13 Jan 2009

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It said growth is being dragged down by the US sub-prime mortgage crisis and a drop in exports to the US.

The World Bank also warned that governments in the region need to be watchful over rising inflation.

Trade with the US is key for most economies in East Asia, which is defined by the World Bank to include Southeast Asia and most other countries in the region, with the exception of Japan.

World Bank said these economies will be hurt by falling exports to the US and reduced spending in the wake of the sub-prime mortgage crisis.

Following the 10.2 percent expansion last year, the World Bank now expects developing East Asian economies to grow by 8.6 percent in 2008 – the slowest pace since 2002.

Growth in Indonesia is seen moderating to 6 percent and in Malaysia to 5.5 percent. But the World Bank warned that soaring food and fuel prices is now East Asia’s biggest challenge. Economists said rising costs will hurt developing economies the most.

Joseph Tan, Senior Strategist, Fortis, said: “I think if you look at the problem with food inflation, it is certainly a lot less severe in Singapore, compared to some of the other countries. Obviously in Singapore, we have a fairly even income distribution pattern as compared to some of the other poorer countries in Asia.

“(With regards to) what the World Bank said about the regressive nature of subsidies, we don’t have that problem quite as badly here in Singapore as compared to some of the other countries. The poor will certainly feel it a lot more when food prices start to go up because it is a much bigger part of their consumption basket, and I think that is going to affect the countries that are a lot poorer.”

In its report, the World Bank also noted that Asia is more diversified, with economies like China becoming global growth poles, cushioning the impact from a US slowdown.

The World Bank expects the US economy to grow between 0.5 and 1.4 percent this year, while China is expected to expand at below 10 percent, down from 11.4 percent in 2007.

Source : Channel NewsAsia – 1 Apr 2008

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