Modest economic slowdown in store for Asia

Economists cited the region’s already elevated growth rates, rising domestic demand in China and India and the leeway policy makers in the region have to ease fiscal and monetary policies as factors that could offset a major global slowdown.

Of the 12 economies surveyed in the Asia-Pacific, economists predicted that gross domestic product growth in four — Indonesia, Malaysia, Thailand and South Korea — would be higher in 2008 than this year.

Economic growth would be slightly lower in the rest of Asia, including China, India, Singapore, Australia and the Philippines.

That forecast comes at a time when housing markets in the United States and in parts of Europe are slumping, prompting downward revisions in estimates for U.S. consumption and growth, and just a week after the Federal Reserve slashed overnight rates by half a percentage point to buffer the world’s largest economy.

“It’s not going to be catastrophic,” said Bill Belchere, chief Asian economist at Macquarie Securities.

Already there were signs of slower demand for imported goods in Japan, the euro zone and the United States, and slackening demand in the world’s leading economies would hit Asian growth with a lag, he said.

“But the top-to-bottom slowdown is not as dramatic as in 2000-2001,” he said.

The evidence so far has been mixed. Thai exports hit a record high in August, but Singapore’s electronics shipments have been dropping. Taiwan’s export growth slowed in August but export orders pointed to sustained demand in the technology sector.

Belchere said that while the evidence suggested that a 1 percentage point drop in global growth historically had shaved about 0.4 percentage point off Asian growth, this time the impact would be less severe.

Others were less sure. Last week, Lehman Brothers cut its forecast for growth in Asia, excluding Japan, to 7.5 percent in 2008, down from an estimated 8.4 percent in 2007.

Emerging Asia on average grew by 8.5 percent in 2006.

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