Inflation, monetary control and the U.S. economy drag Asia down
September 16th, 2008 - by Nazia Vasi
Asia’s growth tigers are mellowing down according to the revised statistics on the regions growing economies released by the Asian Development Bank. According to the bank, The slowdown in the U.S. economy is now gradually impacting Asia’s developing nations which are expected to grow at 7.5 percent this year, the slowest growth in the region since 2003. The ADB also slashed the 2009 growth forecast to 7.2 percent from the previous 7.8 percent as it said the global slowdown, high inflation and tight monetary policy would cut back on expansion.
Reuters quoted the report - “If the sub-prime crisis worsens significantly, Asia is bound to suffer much more serious financial effects, including an abrupt reversal of the capital inflows that have held up well so far.” Experts also believe that the decline of the U.S. economy, could change global war politics and influence trade thereby slowing the rapid pace of globalisation we have witnessed in the least few years.
Inflation which is the greatest risk in emerging economies in Asia is expected to reach 7.8 percent in 2008, a sharp increase from a forecast of 5.1 percent made in April. Next year, inflation is likely to come in at 6.0 percent, according the the ADB.
The ADB maintained its 2008 growth forecast for China, the world’s fastest growing big economy, at 10 percent but said India was likely to expand only at 7.4 percent against the April forecast of 8.0 percent.
In 2009, China is seen growing 9.5 percent and India 7.0 percent.
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September 16th, 2008 at 5:58 pm
Japan has taken a big hit on lending to Lehman Brothers (who just filed for bankruptcy) and who owe 7 banks there USD1.8billion. The BOJ just released 13.5 billion British pounds into the markets in Tokyo to stave off a Japanese crash. Quotes from Japans Financial News Agency:
The financial services minister, Toshimitsu Motegi, attempted to allay fears that, having survived the worst of the sub-prime crisis, Japan was about to be hurled into the turmoil currently rocking the economies of the US and Europe.
“So far, we haven’t confirmed any signs that Japanese financial institutions are seriously affected,” he told reporters.
The finance minister, Bunmei Ibuki, said he was confident Japan’s would have limited exposure to Lehman’s collapse.
“Considering the conditions of each financial institution’s self-owned capital, we do not have to worry about the Japanese financial system, though those entities have extended loans to Lehman,” he said.
September 16th, 2008 at 6:21 pm
Quite an afternoon! The MSCI finished 3.9% down today on trading results in Japan, China, Hong Kong and Korea. Mumbai’s Sensex down 3.5% following the news about Lehman Brothers bankruptcy. Not too bad. Some Asian protection against US subprime fallout. Asian banks didn’t buy much into that and it seems the Japanese were the worst affected. AIG still got downgraded for their debt though, and they are big players in Asia…it ain’t over yet.
September 16th, 2008 at 6:23 pm
Guess who’ll buy into US financial institutions? Chinese state and Indian offshore equities. Nothing like a fire sale. More US assets going across to Asia.