After slowing this year, Asian economic growth could rebound next year as government spending and interest rate cuts spur demand, BNP Paribas SA said yesterday.
Asia, excluding Japan and China, is forecast to grow 4.3 percent next year after a 1.4 percent expansion this year, Richard Iley, an economist at the bank, wrote in a report.
Public spending in China, Taiwan and South Korea, combined with increasingly loose monetary policy, should help to drive a “reasonably vibrant” recovery, he said.
Asian governments are planning more measures to boost growth as a slump in global demand hurts exports, deepening the region’s economic slowdown.
South Korea has pledged about US$30 billion in extra spending and tax cuts since September. China may follow a 4 trillion yuan (US$585 billion) spending package announced in November with a second plan as early as this month.
“The scale of the global policy response — monetary and fiscal — should ensure the recovery is more V than U-shaped,” Iley said. “In many instances, economies will experience a 6 to 7 percentage point swing in growth rates.”
Iley’s report — titled Asia: Apocalypse Now — said that before improving, Asia’s economic growth would deteriorate this year.
“Global industrial production appears to have collapsed at a 30 to 40 percent annualized rate since September,” he said, referring to the “biggest demand shock since the 1930s.”
As a result of the drop in output, BNP Paribas cut its forecast for Asian economic growth last year to 1.4 percent from a November prediction of 3.9 percent.
The region comprises Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand, according to BNP Paribas.
Iley said China is forecast to grow 7.7 percent this year, helped by the November fiscal package “worth an eye-popping” 14 percent of gross domestic product over two years.
The economy probably expanded 9.3 percent last year, slowing from 11.9 percent the year before. Iley predicted 8.1 percent growth next year.
Hong Kong is likely to grow 3.5 percent next year after shrinking 3.4 percent this year, the bank predicted.
Taiwan may expand 3.9 percent after contracting 3.3 percent; Singapore may grow 4.4 percent after declining 2.8 percent this year. South Korea may expand 3.2 percent, rebounding from a 2.4 percent contraction, the bank said.