Asia in best position to absorb shocks of financial crisis
Building upon my working hypothesis...
LONDON, Dec. 29 (Xinhua) -- Among the emerging markets, Asia is in the best position to absorb the shocks of the recent financial crisis, said Gerard Lyons, chief economist of Standard Chartered in his recent analysis report.
There are big differences between the advanced economies and some of the emerging countries, particularly in Asia and the Middle East, Lyons said. He noted there are many structural problems in the West, such as the overhang of debt, which suggests the recession may not be followed by an early or strong rebound.
In contrast, in many emerging countries, savings are higher and domestic imbalances are not seen, suggesting that the downturn maybe more cyclical in nature in emerging economies than in the West. In that case, 2010 is likely to be a recovery year, he said.
It is always the case that a US downturn would impact Asia directly through slower exports and indirectly through equity markets and weaker confidence, said Lyons. But Asia, including Korea and Indonesia, should have sufficient policy tools and resources to cope. he said.
However, it is important not to be complacent about the outlook for emerging markets, he said, adding that policy makers across the emerging world should not fall into the trap seen in the advanced economies over the past year or so, where many early warning signs of impending problems were ignored.
He said Asia experienced its own financial crisis a decade ago, and since then, many countries across the region have ensured more policy ammunition to cope with shocks. "We are seeing their shock absorbers being tested to the full," he said.
On global economic gloom, Lyons said "it may be premature to suggest we are past the worst in the financial crisis, but it does seem that way."
"Whilst we may be past the worst, the financial sector, certainly in the West, is in a fragile situation. And to say we may be past the worst does not mean we are about to recover. It could take years to work through the problems of various derivative markets," he said, adding that 2009 will be a tough year for the advanced economies, notwithstanding all the stimulus measures.