A “long and severe recession” for Asia? Perhaps not
The IMF said that it expects growth in Asia to slow to 1.3 per cent this year; this includes 6.5 per cent for mainland China (7.5 per cent next year), and 4.5 per cent for India (5.6 per cent in 2010).
By contrast Japan’s economy is projected to shrink 6.2 per cent this year, expanding a mere 0.5 per cent next year.
Lower exports to the West and the continued turmoil in the world’s financial system are to blame.
Initiatives taken by Asia governments are insufficient to pull the continent’s economies out of the doldrums. Asia’s model of development needs some rethink to increase domestic consumption and reduce these economies’ dependency on exports.
Malaysia, the Philippines and Thailand will be among the hardest-hit because of their reliance on high tech exports.
Other experts suggest however that this doom and gloom scenario fails to take into account the renewed flow of billions of dollars in foreign investments which are revive local economies.
Outsiders have poured a net US$ 6 billion into six Asian markets since early March, according to BNP Paribas, helping to boost mainland, Taiwan and South Korean stocks by up to 35 per cent this year.
Anthony Bolton, president for investments of Fidelity International, an affiliate of the world's top mutual fund firm, Fidelity Investments, said that he has been investing for months in Asian markets, which in his opinion are rallying.
Bratin Sanyal, the head of Asian equity investment for ING Investment Management, agrees.
“We believe the bigger economies in Asia are going to come out of the downturn more quickly, especially China, India and Indonesia but also Singapore and Hong Kong,” he said.
Still, some fund managers do advise caution when looking at the figures.
Even if these economies have stopped their slide, sequential improvements in numbers are not necessarily a sign of economic recovery, but could be a temporary bleep due government stimulus packages, with China’s topping the list.
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