Goldman Sachs Group Inc on Thursday slashed growth forecasts for the Asian Tigers as their exposure to the world economy — once one of their greatest strengths — is now backfiring as global growth slows amid trade tensions.
“Besides their own domestic reforms, they all benefited enormously from the broader context of globalization and the rapid economic development of the Asia-Pacific region,” Goldman economists led by Andrew Tilton wrote in a report. “However, the same characteristics that helped them benefit on the upside have left them relatively more exposed to the recent slowdown in global growth.”
Analysts dubbed Taiwan, Hong Kong, Singapore and South Korea the Asian Tigers for their rapid, trade-driven growth in the 1980s and 1990s.
While some economies could potentially benefit from trade diversion as suppliers move out of China, the windfall would most likely go to Southeast Asian countries that are connected by land routes to China — such as Vietnam — rather than to the tigers, the report said.
The report lowered Taiwan’s GDP forecast from 2.4 percent to 2.3 percent, as the effects from a US-China trade war would be somewhat offset by a US move to import more from Taiwan and less from China.
For Hong Kong, Goldman expects GDP to shrink 0.5 percent in the third quarter from a year earlier, as opposed to its earlier projection of 2.1 percent expansion. For the full year, Goldman forecast just 0.2 percent expansion.
In addition to a weak global growth and trade environment, ongoing political protests have affected domestic demand, the economists wrote.
Goldman lowered its forecast for Singapore’s GDP growth this year to 0.4 percent, from a previous 1.1 percent projection.
The Monetary Authority of Singapore is likely to reduce the slope of its exchange rate band — its primary monetary policy tool — from 1 percent to 0.5 percent per year at its October meeting, and then to 0 percent in April next year, the economists said.
For South Korea, Goldman sees the economy growing 1.9 percent this year, lower than the 2.2 percent it previously forecast.
The firm now expects another 25-basis-point cut to the benchmark interest rate this year — most likely in October — in addition to last month’s cut.
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