Asia is poised for V-shaped recovery next year

Source : Business Times – 3 Dec 2009

ASIA is poised for a sharp economic recovery next year, even as developed economies in the West continue to struggle, according to Standard Chartered’s chief economist.

‘Our forecasts suggest the recovery will take the shape of an L or a U in the West and a V in the East,’ Gerard Lyons, who is also the group’s head of global research, says in a report published yesterday.

But open and export-dependent economies – Singapore, Hong Kong and Taiwan – are likely to grow below trend, due to sluggish exports to major markets in the West, the report says.

In Asia, growth will be centred on China, India and Indonesia, which have large domestic markets and relatively closed economies that cushion them from external shocks.

Overall, ‘2010 is likely to be the year of global recovery’, Mr Lyons says. ‘A double-dip recession would require either an external shock – most likely an event that drove oil prices sharply higher, such as an escalation of tension with Iran – or a policy-induced shock triggered by premature policy tightening in the West.

‘We are not predicting a double-dip, although we would not be surprised if a number of economies witnessed a negative quarter of growth at some stage.’

But even as Asia leads the global recovery, ‘we continue to stress the need to focus on levels’ – the dollar value of goods and services produced – rather than just growth rates, Mr Lyons says.

In 2008, the world’s economic output, measured by gross domestic product, was US$60.9 trillion, with advanced economies including the US, Japan, Germany, France and the UK accounting for more than half of global output, according to International Monetary Fund data.

‘If the West is not booming, the world will not boom. And the West is not going to boom,’ Mr Lyons says. ‘The US consumer, the key driver of the global economy for some time, faces a difficult outlook.’

He expects the world economy to grow 2.7 per cent next year, after shrinking an estimated 1.9 per cent this year.

Asia’s economic output is projected to expand 7 per cent in 2010, faster than this year’s estimated growth of 4.5 per cent.

Its biggest economic growth engines, China and India, are expected to expand 10 per cent and 7.5 per cent, respectively, compared with 8.5 per cent and 6.8 per cent in 2009.