Japan earthquake will further slow growth in Asia


Tue, Mar 22, 2011 - Page 11

Japan’s devastating earthquake will further slow growth in Asia, where rising oil prices and higher interest rates are already cooling an engine of the global economy, economists said.

No one is predicting a massive slowdown, but as fears of spreading radiation from Japan’s Fukushima Dai-ichi nuclear power plant and prolonged power outages grew, forecasts about the economic effect of the quake also darkened.

Few economists are ready to specify just how big Asia’s slump will be because of the uncertainties over the nuclear plant and when power shortages will be resolved.

“You are clearly not talking about reducing growth estimates by 50 percent for the region,” UBS economist Duncan Wooldridge said. “It’s likely to be measured in increments of maybe 25 basis points.”

Growth in East Asia was already slowing after recovering from the financial crisis and is likely to cool further as central banks raise rates to tame inflation, the World Bank said yesterday.

Its pre-quake forecast pegged regional economic growth at 8 percent this year and next year, down from 9.6 percent last year.

The quake’s impact on Asian output stems not so much from a slowdown in Japan itself, but from Asia’s tightly linked supply chains.

Disruptions in Japan are pushing up prices and causing shortages of critical raw materials and parts, especially for electronics, autos and shipbuilding. That in turn slows production in Japan’s fast-growing neighbors, which are also suffering a short-term falloff in demand from a major export partner.