Asian economies first to bounce back

They are expected to grow 3.2% next year despite the US recession

KUALA LUMPUR: The world economy is in bad shape, recession is spreading, but Asian economies are in relatively good condition and likely be the first to recover from the current crisis, according to economists.

David W. Carbon

“Last in, first out,’’ was how DBS Bank Ltd economic and currency research managing director David W. Carbon described his optimism about Asian economies at a forum on the state of the global economy organised by the Asian Strategy & Leadership Institute (ASLI) yesterday

Carbon said Asian economies were expected to grow 3.2% in 2009 despite the recession in the US and Europe as Asia was no longer as dependent on the US as it was eight years ago.

Joseph Tan, the Asian chief economist at Credit Suisse Singapore, said as the current scenario was highly volatile and it was tricky to forecast how long the economic and financial crisis would last.

“Even if we have turned a corner, we are still going straight into recession alley,’’ Tan said.

Share prices across the world have plummeted this year, as investors lost their appetite for risk amid a deteriorating global economic outlook.

Joseph Tan

Most major Asian equity markets, from Japan to Jakarta, have seen the value of their stocks halved year-to-date. But the US dollar has gained against almost all major currencies despite its worsening economic problems. Tan believed that the trend would be reversed by the second half of next year.

He said the consensus view was that the ringgit would probably hold at 3.80 against the greenback, and would rise back to 3.50 by the end of 2009. The ringgit had lost 9% year-to-date against the US dollar.

It was at 3.64 to the US dollar yesterday. Carbon said he wouldn’t be surprised if the recession and the mortgage mess in the US resulted in more banks folding there.

“Five hundred or 600 failures would not be a surprise. Between 1989 and 1993, about 1,200 American banks had to go down,’’ he said.

P.K. Basu

The US could take a leaf from Malaysia’s experience in dealing with the toxic debts of banks, said Daiwa Institute of Research chief economist for Asia Prasenjit K. Basu.

“The US troubled asset relief program started out as an exact copy of what Danaharta was 10 years ago,’’ he said, referring to the plan by US authorities to directly inject capital into troubled banks, which Malaysia also did during the Asian Financial Crisis of 1997/98.

Joseph Tan and P. K. Basu are StarBiz columnists