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People's Daily Online>>World >> World/Regional Organizations

Eurozone,US recessions pose threat to Asia (2)


15:36, December 06, 2011

Nonetheless, the region's financial systems remained just as vulnerable as they were in 2008. The report notes that heightened risk aversion would see investors slash holdings of Asian financial assets while highly leveraged European banks would cut lending, leading to tighter credit conditions.

To cope with a potentially prolonged global crisis and a slow subsequent recovery, Asia's policymakers can use available financial, monetary and fiscal tools, said ADB. These include mechanisms in place to safeguard financial stability and ensure sufficient credit is available regionally. Monetary policy must remain flexible while exchange rate coordination would avoid competitive devaluations. And the region still has sufficient fiscal space to apply stimulus gradually and judiciously where needed while avoiding too much budgetary strain.

The report forecasts the eurozone economy will expand 0.5 percent in 2012 with the US economy growing by 2.1 percent. For 2011, ADB is still forecasting growth of 1.7 percent and 1.6 percent for the two economies respectively.

Growth in the Chinese mainland is likely to moderate even as domestic demand continues to rise. It is now forecast at 8.8 percent in 2012 after expanding 9.3 percent this year. In September, ADB forecast growth of 9.1 percent in 2012.

The newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China, will see slower growth both this year and next year in large part because they are more dependent on international trade than their neighbors, said the report, adding this leaves them highly vulnerable to an economic contraction in Europe and the US

ASEAN's economies will also grow more slowly than previously expected. Thailand, hit particularly hard by the recent floods, should recover from supply disruptions in 2012. ADB now sees Thailand's economy growing a smaller 2.0 percent in 2011, but is maintaining its 4.5 percent growth forecast for 2012.

Japan's economy is forecast to bounce back from the effects of the recent natural disasters as supply chains are rebuilt, but the strong yen will likely hurt exports while domestic demand is likely to remain weak. As such, ADB continues to forecast a contraction of 0.5 percent in 2011 followed by a 2.5 percent expansion in 2012.

Based in Manila, ADB is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members -- 48 from the region.

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