Asia: Slowing down

The economies of Asia are beginning to slow. How fast and for how long?

The IMF has alerted that Asian growth has slowed significantly, particularly during the second half of 2011, due to reduced demand from the developed world. The Bank of Thailand has slashed its growth forecast for this year to 2.6% from a previiously estimated 4.1%. And most of these economies - including Japan's - will continue to be affected during 2012 by Euro troubles and debt-reduction concerns in the United States. America is set to grow by only 1.5% this year. Southern Africa, which had been a bright spot, has had to reduce its growth forecast for 2012 to 5.75%. The overall effect has been to reduce global growth to only 4%, down from 5% last year.

Malaysia looks fairly robust, with analysts predicting 2012 growth to be 5-6% despite successful fiscal deficit reduction measures.  

By contrast, the typically strong economic powerhouse of Singapore predicts its growth to moderate to between 1% and 3% in 2012, reports eTaiwan News.

The big regional engines of growth, China, India and Indonesia will all slow next year. And while they achieve reaonably high levels by comparison to rates in developed nations, they are entering a more challenging period. There are encouraging signs in specific sectors, for example Indonesian footwear exports are set to expand modestly in 2012. Although, by and large the picture appears grim.

While Europe and America consumed, the East grew. It was always going to be the case that when the developed West attempted to contain the expansion of its debt mountain and even tried to reduce it, Asia would suffer. Domestic markets in the big Asian economies are not yet large enough to take up the slack, growth until now having been driven by exports. 

And with major concerns about an impending Chinese property bubble about to burst, with dire knock-on effects on Chinese savings and investment, the immediate future of stock exchanges in such cities as Shanghai looks precarious. Nomura, a Japanese investment bank, has predicted that Chinese growth will slow to under 8% during the final quarter of 2011 and into the first period of 2012, reports Xinhua.

Economist Kaushik Basu, writing for the BBC, notes "the Indian economy is going through a difficult patch. Industrial growth has slowed over the past half-year and inflation has remained high." However, Basu reports more encouragingly "Even after the slowdown, India is growing at more than 7.5%.  Further, what often goes unremarked is that, since 2003, India has been saving and investing well over 30% of its national income."

Many of these countries' treasuries have indeed stored huge wealth, but much of that must have exposure to dodgy Western sovereign and corporate debt. "UK 10-year government bond yields fell below corresponding German yields on Thursday, reflecting investors’ concerns that Germany is exhibiting signs of contagion from the European debt crisis" noted Financial Post. It looks as though the UK is beginning to be viewed as a haven in that time-zone. Having said that, India's renouned fascination for gold will undoubtedly stand it in good stead as the precious metal nudges US$1,700 per oz.

Beyond the next six months it's difficult for punters to predict the adverse effects of all this on the economies of Asia. And what measures might be available to regional governments to off-set market turmoil and reduced global confidence. But what's certain is that it's vital that Latin America, Africa and, in particular, Asia persist in developing their economies, otherwise the world stares a protracted period of severe contraction in the face.

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