The Art of Shifting Gear


By Anoop Singh

If you needed further evidence about the fallacy of Asia’s economy “decoupling” from that of the developed world, then this month’s Asia and Pacific Regional Economic Outlook would be a good place to look.

The findings in this new report,  just released in the Malaysian capital, Kuala Lumpur, illustrate how Asia’s economic fate remains heavily dependent on events far beyond its immediate borders.

Consider two possible future scenarios to illustrate this ongoing interconnectedness: if global prospects continue to brighten following recent, concerted policy actions in the euro area and, if there are further indications of recovery in the United States, this will all augur well for trade-dependent Asia.   Against this backdrop, the region could enjoy a boost in demand, fresh capital inflows and even a revival of overheating pressures.

But,  were the financial turmoil in the euro area to escalate and spread globally, this would likely result in a sharp fall in demand for Asia’s exports by advanced economies and a possible retrenchment of credit by stressed foreign banks, all of which would be a severe blow to Asia.

Continue reading

Follow

Get every new post delivered to your Inbox.

Join 743 other followers

%d bloggers like this: