Intellectual Thoughts by Sanjay Panda !!!!!: Asia Seen Weathering Any US Recession


Tuesday, January 22, 2008

Asia Seen Weathering Any US Recession

Asia would be able to weather any recession in the United States, analysts say, because rising trade and investment within the region make it less dependent on the U.S. economy than in the past. While a severe downturn in the United States would drag on Asian growth by eroding demand for exports, a rapidly growing middle class is fueling orders for automobiles, electronics and housing -- much of which will be supplied from Asia itself.

Voracious demand for oil, iron ore and other commodities to build roads, sewage systems, and office buildings -- especially in the booming economies of China and India -- will also help sustain the region through any U.S. slowdown.

The U.S. economy is not that important anymore. Excluding Japan, 43 percent of Asia's exports go to other nations in the region, Lehman Brothers calculates -- up from 37 percent in 1995.

China and India represent a bigger presence on the world stage than just a half dozen years ago. China, in particular, has "more it can bring to buffer whatever happens in the U.S.

A drop of 1 percentage point in U.S. economic growth would shave 1.3 percentage points from China's growth rate due to lower exports, Citigroup says.

Since China is growing so fast, that isn't likely to make much of a dent. China's economy will still expand 11 percent this year, slightly slower than in 2007, Citigroup projects. Lehman Brothers forecasts 2008 growth will drop to 9.8 percent.

But some economist cautioned that growth in China and India could not make up all the slack of a U.S. downturn.

Asian stock markets -- many of which had stellar runs last year -- have tumbled in recent weeks amid worries that a slowdown in the U.S. will hurt corporate profits.

AP

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