Asian economies face a challenging year in 2008 but as a group they are still expected to show growth of 10 to 12 percent.

Asian economies face a challenging year in 2008 but as a group they are still expected to show growth of 10 to 12 percent.

This is the forecast from HSBC in its latest report on the region.

However, a recession in the US could knock off a few percentage points off Singapore’s economic growth.

With a US recession on the horizon and the US sub-prime mortgage crisis still taking its toll, HSBC is predicting a difficult year for Asia in 2008.

Economies such as Japan and Taiwan are expected to be most cyclically sensitive to the US slowdown. But emerging ones - led by China and India - are forecast to continue booming along.

Garry Evans, Pan-Asian Equity Strategist, HSBC, said: “Well, it’s going to be a difficult year, there is no doubt about that. We’ve got the US slowing - credit crunch out there, everyone is focused on the bad news.

“I don’t think it’s going to be quite as bad as that though because governments are going to react to this bad news. The Fed is going to cut rates in the US - we’ve going to have a fiscal stimulus package there and I think Asian countries are going to grow reasonably stronger this year.

“You’re not going to see that much of a slowdown, particularly in China and India - and if you do see a slowdown, governments here have also got room to cut rates and increase spending.

“So I actually see the Asian markets going up this year - ultimately 10 to 12 percent or something like that. I don’t’ see a bear market but I think it’s going to be a year of ups and downs - your probably going to have to be a little patient to get a return.”

Mr Evans added that inflationary pressure will settle.

He said: “Well, ultimately if we’re seeing global growth slowing, then I think you’re going to see inflation becoming less of a worry during the year. In general, in most places, inflation is still a food phenomenon, and it’s not really showing much signs of coming though to any other areas in the economy.

“We’re all a bit worried about inflation at the minute. Certainly the most worrying scenario is when you have high inflation and slowing growth - in a so called stagflation - and if we have that then we could be in for a very tough ride. But I think generally as growth slows, inflation will come off the radar scene as being a problem.”

Here in Singapore, HSBC says the financial and property sectors will remain positive, but exports will remain susceptible to a US slowdown.

Peter Morgan, Chief Economist, Global Research Asia Pacific, HSBC, said: “Well we are fairly optimistic on Singapore - we think that the strength in loan growth and the strength in the property sector is having a positive impact.

“Growth in Singapore is likely to slow, and Singapore is still a fairly export sensitive country and if the US looses a couple percentage points of growth than that could knock off maybe 3 percentage points on Singapore’s growth.”

HSBC is forecasting the Singapore economy will grow 7.3 percent in 2008. - CNA/ch

Source : Channel NewsAsia - 18 Jan 2008