Some Asian economies are at risk of a “modest” recession as the worsening European debt crisis hurts demand for exports, according to Mirae Asset Securities.
The world is going into a “long, shallow, slow period which may embroil recession for some of the more highly exposed economies in Asia,” Bill Belchere, global chief economist at Mirae, said in an interview in Hong Kong today. Singapore and Hong Kong are most at risk of a recession, Taiwan also faces the threat of a contraction, while South Korea may “stop growing for a quarter or so,” he said.
Asian stocks swung between gains and losses today amid concern that Greece’s latest effort to cut its deficit won’t be enough to stave off a default and after further evidence of weakness in the U.S. economy. Exports have fallen or slowed from the Philippines to Malaysia in recent months, damping growth in a region that led the recovery from the 2009 global recession.
While the global economy should be able to avoid a significant recession, the expansion will be slow, Belchere said. The “modest” and “shallow” weakness for Asian economies may last until the first quarter of 2012, he said.
Singapore’s gross domestic product declined an annualized 6.5 percent in the second quarter from the previous three months, while Hong Kong’s economy shrank 0.5 percent.
“The great uncertainty is that we don’t know what’s going to happen in Europe,” Belchere said. “The pain is bad enough” that the U.S. and European Union will come up with “better policies” to resolve the issues by early next year, he said.
Greece, Ireland and Portugal may have to be removed from the eurozone, the economist said.
“Greece has done nothing, they are not taking hard medicine,” he said. “Growth is slow so they can’t even meet their fiscal targets.”
While Ireland has cut wages, the economy may not grow fast enough because of the weakness in the eurozone, Belchere said.