For Want of a Better Title

Asian Economies first off the block?

Crouching Tigers (The Economist)

But Singapore, HK, Taiwan and S Korea might be slower than the rest…

There is more argument, however, over the smaller, more export-driven economies, such as Hong Kong, South Korea, Singapore and Taiwan. Robert Subbaraman, an economist at Nomura, offers several reasons why they are likely to remain sluggish for the time being. The recent rise in exports and production, he argues, largely reflects the fact that firms are no longer running down stocks. This will provide only a temporary boost unless global demand picks up. Firms’ spare capacity also means that investment will continue to fall, while rising unemployment threatens to dent consumer spending. Nor is China’s stronger growth likely to save the region. Over 60% of China’s imports come from the rest of Asia, but about half of these are components which are assembled in China then sold to the rich world.

It’s not all doom and gloom though… we might still pull out earlier than the rest of the world

A second reason for expecting a stronger bounce is that fiscal stimulus in Asia is bigger than in other regions. China, Japan, Singapore, South Korea, Taiwan and Malaysia have all announced fiscal packages of more than 4% of GDP for 2009, twice as large as America’s stimulus this year. The pump-priming should also work better in Asia than in America or Europe, because modest corporate and household debts mean that tax cuts or cash handouts are more likely to be spent than saved. Banks, moreover, are in much better shape and so have more freedom to support an increase in domestic spending.

So let’s hope we’ll be coming round the mountain soon.