Impact of prolonged eurozone crisis on Asia to vary – consultant

01 November 2012 03:49  [Source: ICIS news]

SINGAPORE (ICIS)--A prolonged eurozone crisis will have a significant impact on trade and exports growth in Asia, but this will vary among countries in the region, a consultant said on Thursday.

Falling consumption in the EU and the West in general will weigh on external demand for countries in Asia, but export-dependent economies such as Taiwan, Malaysia, Hong Kong and Singapore are especially exposed to this decline, said Adam Jarczyk, Asia-Pacific practice leader at Frontier Strategy Group.

This was seen during the latest financial crisis in 2008-2009, when countries such as Malaysia and Taiwan saw a drop of about 20% in exports, he said.

On the other end of the spectrum, countries such as China, South Korea and India are less exposed to a drop in external demand as compared to these countries, Jarczyk said.

Looking ahead, Jarczyk said that most Asian governments have some flexibility in tweaking their fiscal and monetary policies to absorb the impact of the eurozone debt crisis, partly because of the relatively low debt levels that they currently have.

Asian governments also "still have room" to adjust their interest rates to control growing inflation levels, he added.

In Europe, growth forecasts for Portugal, Italy, Ireland, Greece and Spain (PIIGS) are deteriorating, which is causing great uncertainty over the future of the eurozone.

"Growth forecasts have worsened over the last six months... and the austerity measures that were introduced are having a significant impact, with their economies expected to contract for at least another year," Jarczyk said.

Uncertainties over Berlin's willingness to bail out PIIGS have also raised investor concerns about another round of defaults, he added.

Over in the US, Jarczyk said that the economic recovery in the US is being hindered by unprecedented unemployment levels as well as an "anemic housing market".

Housing statistics in the US are at lows not seen in 50 years and demand is "severely depressed" currently, he added.

Jarczyk was speaking at the 2nd ICIS Asian Surfactants Conference in Singapore that is running on 1-2 November.

By: Nurluqman Suratman

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