Asia not immuned to US slowdown

This is an excerpt from a report by the BBC on its website last Friday (8 Feb 2008):

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Wider problems

Meanwhile, China, India and other East and South East Asian economies have experienced break-neck growth over the past few years as current account surpluses and foreign exchange reserves have ballooned.

But as the global credit crisis and US housing slump has brought the world’s largest economy to its knees, concerns have persisted that these problems would spread to Asia, which is heavily reliant on US imports of its products and foreign investment for growth

The ADB’s Mr Kuroda confirmed these worries. “A significant slowdown in the US economy will most certainly affect the region’s growth performance through investment, trade and financial linkages,” he said. “A deep and prolonged US recession should it ever occur, could be accompanied by much slower growth in Asia.”

He said that in that case, governments should take steps to bolster confidence in the region’s economies, including introducing fiscal measures if necessary. But Mr Kuroda added that this was not an immediate priority for Asia’s policy makers right now, as they struggle to put a lid on spiralling consumer prices.

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