Asia

Outlook for Asia Deteriorates Further

Global summits such as the 15/16 November G20 meeting in Washington and the 23 November APEC summit in Lima conclude with hopeful declarations but without delivering any concrete approach to restore global growth. APEC leaders confirmed their adherence to free trade and expressed optimism that the global economic crisis could be overcome by 2010. Meanwhile, contrasting the confidence expressed by world leaders, the U.S. government has to continue to provide life-support measures to the financial sector. Amid ongoing financial turmoil, concerns are increasing about the impact of the financial crisis on the real sector. Although governments have announced a host of measures to restore confidence, most major advanced economies are already in a recession. The United States is headed for a severe contraction in the final quarter of the year, as private consumption will suffer from surging unemployment. On 24 November, President-elect Barack Obama announced a stimulus package of unspecified dimensions to be implemented at the beginning of next year. Meanwhile, the Euro area has already entered into a recession for the first time since its inception as leaders are struggling to implement fiscal stimulus packages to support monetary easing. Finally, Japan’s economy is also in a recession for the first time since 2001. The country is suffering from a stronger yen, which has reached a 13-year high against the dollar and is thus exacerbating the effects of waning external demand. Against this backdrop, growth in the Asian region will slow notably in the coming quarters, as the regional economy is beginning to feel the impact of weaker external demand and tight credit conditions.