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NEWS UPDATES Asean Affairs                    6  August 2011

Slow US growth impacts Asia

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The slower growth in the United States will have wider implications on the global economy since the country's US$14.7 trillion economy makes up about a quarter of global nominal gross domestic product (GDP).
Asia's growth including Malaysia's, have relied primarily on exporting to the United States and to a lesser extent, Europe.
 

But economists pointed out that this model of growth would have to change since the public and private sectors of the US and the eurozone have long years of deleveraging ahead, which would mean slow growth.
 

The spending cuts and weak consumer spending in the US together with the unraveling sovereign-debt crisis in the eurozone have consequences for export-reliant Asian economies, where inflation threatens growth.
 

HSBC Holdings plc co-head of Asian economics Frederic Neumann said in a report dated Aug 3 that the debt saga in the US and the eurozone have long-term financial and economic implications for Asia.
 

He said growth would suffer as the West deleveraged over the coming years. “Amid slower growth in the West, rates of return will decline. Investors will thus increasingly search for other, more promising opportunities. These are to be found primarily in the east, whether in China or India, or indeed Malaysia, which will benefit from soaring growth in both,” Neumann said. He added that the structure of Asian growth would need to change as exports to the West would no longer drive prosperity.

Neumann said intra-Asian trade was now emerging as the key driver for global growth, a process which would accelerate.

However, he said Asia's economies cannot live by exports alone, whether to the West or to emerging economies.

“Local demand will need to pull its weight as well. The temptation, of course, is to use cheap capital inflows from the West to boost local demand. But that is not a lasting proposition. Easy money is never a path to lasting prosperity as indeed the West is currently finding out,” Neumann said.

He said fundamental reforms were needed and the single-minded focus on competitiveness would have to be shelved.

“Rather, in the absence of strong demand from the West, what matters now is a single-minded focus on strengthening domestic growth,” Neumann said.


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ASEAN  ANALYSIS

This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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