News Room - Business/Economics

Posted on 14 Jul 2009

Economists see good growth in Asia going into second half of 2009

Experts said Asia's fortune in the second half of the year is likely to rise as fast as it fell.

 

For instance, global banking giant HSBC has revised its 2009 growth forecast from 3.8 per cent to 4.2 per cent for Asia excluding Japan.

 

But economists warn that a spike in inflation may hurt growth.

 

The fall of Lehman Brothers last year plunged the world economy into what many thought would be a long and hard recession.

 

But the story is quite different in Asia.

 

Economists have upgraded their forecast for the region with HSBC now projecting a 6.9 per cent growth in Asia excluding Japan for next year, up from 6.6 per cent previously.

 

But one thing to look out for is a spike in food and oil prices.

 

Robert Prior-Wandesforde, Co-Head Asian Economics, Global Markets, HSBC, said: "Our own estimates suggest that the oil price will need to rise to US$165 per barrel before they offset the impact of the interest rate cuts and the fiscal easing. The other big risk for Asia is that these fiscal plans, in particular infrastructure plans simply don't get implemented perhaps because of growing fiscal imbalances, budget deficits."

 

Economists expect China, India, Indonesia and Vietnam to do well, mainly due to rising government and household spending.

 

They said Asia is likely to see a "V-Shaped" recovery on the back of better industrial production data but some remain cautious.

 

Song Seng Wun, CEO & Regional Economist, CIMB-GK Research, said: "We have seen re-stocking taking place which led to the rebound in economic activity in the second quarter on improved orders and production. Whether this will be sustained to the end of the year remains debatable."

 

HSBC said a loose monetary policy is the key to Asia's rebound.

 

And it expects recovery in domestic demand to have a positive impact on regional trade.

 

In the long run, observers said Asia is still the place to be in.

 

But in the near term, despite a slight pick up in confidence, they do not expect foreign direct investments to return substantially till after 2012.