Citigroup Inc reduced its growth forecasts for Asia on concern that an expected recession in the US will curb demand for the region's exports.
Asia's emerging economies will probably slow "more visibly" from the second quarter, said economists Huang Yiping (
"Recent rapid deterioration in economic and financial conditions in the US has dimmed the outlook for emerging Asia," Huang wrote. "This year emerging Asia will likely see its first major growth downturn since 2001."
The region's economies, almost twice as reliant on overseas sales as the rest of the world, are being dragged down by weakness in the US, Japan and Europe, the markets for 60 percent of Asian shipments. Purchasing managers' indexes in China, Singapore, Hong Kong and India already indicate slowing manufacturing growth.
The US Federal Reserve has lowered its benchmark lending rate six times since September to cushion consumers and companies from the worst of a credit crunch that has made some of the world's biggest banks reluctant to lend to each other. Financial companies have posted at least US$195 billion in writedowns and credit losses tied to US mortgage markets.
US growth slowed to 2.5 percent in the fourth quarter from a year earlier and half of the economists in a Bloomberg News survey this month expect a recession this year.
"The US recession is likely to be deeper than previously expected, with growth staying below trend until late 2009," the economists said. "Sharply tighter financial conditions will be a significant drag on the US and other economies for some time."
Asian central bank officials are balancing the threat of an economic slowdown against signs of quickening inflation. Consumer price gains probably contributed to "official tolerance" for currency appreciation in China, Taiwan and Singapore, Citigroup said.
"Rising inflation has been the main policy concern in most Asian economies," the report said.
"However, most Asian economies already show initial signs of a slowdown and, given the recent sharp deterioration of the US economy, downside growth risks are soon likely to be the main concern," it said.
Some central banks may intervene to prevent "excessive" currency gains to maintain competitiveness as exports slow, the economists said. They predict that authorities in China, India, South Korea, Thailand and Taiwan may begin "policy easing" this year.
Asia's growth next year will be 7.4 percent, compared with an earlier forecast of 8.1 percent, the economists predicted.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his